Egyptian LNG needs next year could tighten the market

More Egyptian LNG imports at the start of next year, due to ongoing domestic constraints, could further tighten the European market.?

This comes as Europe will be looking to replace lost Russian pipeline gas volumes through Ukraine with LNG, sources said.

With Egypt's switch to a net importer this year, due to domestic production constraints and growing demand, the global LNG market has seen spells of tightness during the summer restocking season. Expectations are that this will continue over the winter and into early next year.

Egypt stopped LNG exports in April before switching to imports. The country has imported around 24 cargoes, or 1.59 mill tonnes, thus far this year, according to S&P Global Commodity Insights data.

Egypt is also expected to import two more cargoes by the beginning of November, the data showed.

Sources now expect Egypt to purchase more LNG volumes during the first quarter of 2025, which could contribute to a tighter LNGC market and stronger cargo prices.

Traders saw the current constraints with domestic gas supply coupled with expectations for demand to continue to grow, as drivers for Egypt's need for LNG in the short-term.

Egyptian short-term LNG demand is forecast to grow from around 2.50 mill tonnes for 2024 to 3.57 mill tonnes in 2025, before rising to a peak of 4.85 mill tonnes in 2027 and dropping down to 3.80 mill tonnes in 2028, Commodity Insights data showed.

Egypt has released tenders to procure at least 20 LNG cargoes over the summer period and into 4Q24 to cover domestic power generation needs.?

During this period, European gas and LNG prices rose, as market vendors withheld their offers to sell into these Egyptian tenders.

Platts, a part of Commodity Insights, assessed the DES Northwest European LNG marker at $12.704 per MMBtu on 14th October.

Global competition for LNG had kept TTF spreads narrow for most of this year, sources said.

NWE LNG prices have averaged around a 15 cents per MMBtu discount versus the Dutch TTF gas hub during the summer – April/September – compared to an average of around an 87 cents per MMBtu discount seen over the same period last year.

So far this winter, the NEW/TTF discount has averaged 20 cents per MMBtu versus the 71 cents per MMBtu seen in 2023, for the 1st to 14th October period.

The cessation of the 42 mill cu m per day gas pipeline through Ukraine would lead to Europe needing around 10 cargoes per month of LNG to account for the lost volumes, sources said.