Europes Natural Gas Glut Is Growing

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Europes role as a destination of last resort for liquefied natural gas that traders cant sell elsewhere may now be reaching its limits.

With storage sites full and winter looking mild, concerns are mounting on how much more LNG the regions terminals and pipeline networks can handle. Tepid demand in Asia and more supplies from the U.S. and Russia mean Europes ability to absorb gas is under more strain than ever.

This winter and next year are going to be complicated, Arturo Gallego, head of LNG trading and operations at Centrica Plc, said at the Bloomberg Commodity Investor Forum in London. Europe has played an amazing role in this market, but maybe we are running out of tools now.

Unless demand awakens, suppliers may be forced to reduce output. In an extreme scenario, a plunge in prices could even force a reduction, or shut-in, of U.S. export capacity.

The pressure on Europes gas system may get even more intense. LNG imports are set to soar this quarter, helping boost full-year incoming shipments by 65% to 81 million tons, according to Massimo Di-Odoardo at Wood Mackenzie Ltd. Another 10 million tons will be added next year, he said.

If you want to bring a cargo into northwest Europe, I think you are going to struggle to find capacity, Peter Abdo, managing director and head of global origination and LNG at Uniper SEs trading unit, said at BCIF.

Some LNG is already being sold at a discount to regional hub rates in recent ....

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