Elevated Prices Required for High EU LNG Import Volumes

Gas prices in Europe will need to remain elevated to attract LNG away from other regions according to Trafigura.

• Europe will require “huge volumes” of LNG next year due to the missing Russian supplies, with security of supply remaining an issue beyond next winter.
• “We expect gas and LNG markets to remain volatile,” Trafigura said. “While Europe should avoid a blackout this winter by drawing on inventories and cutting demand, it will need to import huge volumes of LNG in 2023 given the massive reduction in flows from Russia.”
• Trafigura has an offtake agreement from the US Freeport LNG terminal which halted operations due to a fire in June and has yet to restart. The Freeport outage “removed LNG and significant flexibility from our portfolio at a time when the market needed them most,” Trafigura said.
• They added that low liquidity in physical and financial markets due to high margin requirements “substantially” increased the cost of moving cargoes.