The global liquefied natural gas (LNG) market is witnessing a significant shift, with Europe increasingly being sidelined as Asian buyers secure limited cargoes. Ship-tracking data reveals a surge in LNG tankers rerouting mid-voyage, with close to a dozen Atlantic shipments redirected to meet demand in the East.
This intensified competition for LNG comes at a critical juncture, exacerbated by ongoing tensions surrounding the Strait of Hormuz. This vital energy trade route, responsible for approximately 20% of global LNG supply, remains under pressure due to actions by Iranian authorities. These actions are reportedly in retaliation for missile attacks from the United States and Israel that occurred nearly a month ago.
Further compounding supply concerns are recent strikes at Qatar’s Ras Laffan facility, the world’s largest LNG producer. These disruptions forced the Qatari energy producer to declare force majeure on Tuesday for contracts with several European nations, including Belgium, Italy, and Poland.
While Europe constitutes a relatively small portion of the supply flowing through the Strait of Hormuz and is primarily grappling with price spikes and localised supply mitigation, the impact on Asian countries is far more profound. These nations rely on the Strait for a staggering 80% of their energy supply. Taiwan, a crucial global chip manufacturer, has reported having only 11 days of gas supplies remaining, highlighting the precariousness of the situation.
The Growing Diversion of LNG Tankers
Since the outbreak of the Middle East conflict on February 28th, the number of diverted LNG tankers has steadily climbed. According to data from the intelligence firm Kpler, the last Qatari cargoes destined for the UK and Italy are expected to arrive by March 27th.
Laura Page, Insight Manager for LNG & Natural Gas at Kpler, confirmed the trend. “We have 11 LNG cargoes that have been confirmed as diverted from Europe to Asia, plus two that have been diverted from Europe to Egypt and one from Europe to Turkey,” she told Euronews.
This escalation has driven up global LNG prices, fuelled by concerns over a tightening supply of all LNG traversing the Atlantic. This occurs at a particularly sensitive time for Europe, as the continent begins its crucial gas storage refill season.
“Thankfully, we are heading out of the winter heating season now, so gas demand will be falling, but the crisis poses major risks for Europe during this upcoming restocking season and could challenge Europe next winter if storage levels don’t get up to sufficient levels,” Page cautioned.
European Gas Prices and Asian Premiums
The Dutch TTF natural gas benchmark, a key indicator of wholesale gas prices in Europe, settled near €53–€54 per megawatt-hour (MWh) on Tuesday. This followed a spike above €60 earlier in the day. While slightly down from mid-week highs, these prices remain significantly elevated compared to pre-conflict levels.
Asian buyers are currently offering a premium of approximately $1–$3 per million British thermal units (MMBtu) more than their European counterparts for spot LNG. This premium, measured by the JKM benchmark, is relatively small but has proven significant enough to reshape global trade patterns. The allure of higher returns is prompting traders to redirect flexible cargoes eastward, where shipping costs are also more favourable, leaving Europe to compete fiercely for the dwindling available LNG supply.
European Nations Scramble for Alternatives
Italy Seeks Algerian Gas:
Italy’s Prime Minister, Giorgia Meloni, is undertaking a visit to Algeria on Wednesday. This diplomatic effort is part of Rome’s urgent quest to secure alternative gas supplies to compensate for the disruption from Qatar, which currently meets 30% of the country’s annual gas requirements.
A study released on Tuesday by the environmental think tank ECCO suggests a pathway for Italy to wean itself off Qatari LNG. The report posits that within a year, Italy could replace these imports through a combination of renewable energy expansion and enhanced energy efficiency measures.
- The installation of 10 gigawatts of new renewable capacity annually could slash gas consumption by 2.5 billion cubic metres, a volume equivalent to 40% of Qatar’s current imports to Italy, according to ECCO’s analysis.
- Additional measures proposed include boosting energy efficiency across residential, commercial, and industrial sectors, alongside increased electrification. However, the study acknowledges that Algerian gas will still be vital in bridging any remaining supply gaps.
- For the remaining 15% of the required volume, amounting to one billion cubic metres per year out of a total of 6.4 billion cubic metres, the study suggests leveraging existing gas infrastructure, particularly the pipelines connecting Italy to Algeria.
Belgium’s Response to Disruption:
In Belgium, the impact of the Qatari supply disruption is less severe, affecting approximately 8% of the LNG imported at the Zeebrugge terminal. Fluxys, the country’s energy transmission network operator, is actively pursuing alternative sources to cover the shortfall. Anticipated LNG shipments are expected from the United States, Nigeria, and Russia. However, with Russian imports slated for complete phase-out by 2027, long-term options remain limited.
Poland’s Resilience:
Poland’s oil and gas company, Orlen, has stated that the suspension of some LNG production by QatarEnergy, which accounted for less than 10% of its projected demand in 2025, does not pose a threat to the nation’s gas supply security. Orlen attributes this resilience to its diversified supply portfolio and the flexibility of its trading tools, which enable the balancing of LNG supplies alongside alternative routes to offset any losses.
US Pressure on the EU Over LNG Access
Meanwhile, the United States has reportedly issued a new ultimatum to the European Union, capitalising on the bloc’s current vulnerability amidst soaring energy prices and potential supply shortages.
US Ambassador to Europe, Andrew Puzder, has indicated that if EU lawmakers do not agree to the terms of a proposed EU-US trade deal, with a vote scheduled for Thursday, the bloc could risk losing “favourable access” to LNG from the United States.
“I don’t know what will happen with respect to energy if they don’t go forward with the agreement,” Puzder told the Financial Times on Monday. “I think the United States will continue to want to do business with Europe, but the terms may not be as favourable. The environment certainly won’t be as favourable. And there are other buyers out there.”
Under the terms of the impending EU-US trade agreement, the European Union is projected to purchase approximately $250 billion (around €212 billion) worth of oil, gas, and nuclear energy annually through to 2028, accumulating to a total of $750 billion (around €700 billion) over the period.
