Surplus LNG production from the US may head to Brazilian markets in the coming weeks, potentially increasing Brazilian supply.
The Brazilian LNG des discount to LNG des northeast Asia reached its highest level in April since July, while its discount to northwest Europe des hit its highest level since October. Prices may continue to be more attractive in Brazil because market participants expect Asian demand to remain lower.
Some surplus availability is poised to emerge from Asian markets now that Chinese production has lost market share in northeast Asia because traditional importers such as Japan and South Korea may eschew China to ensure relations with the rival US, a market participant said.
China has not imported a US LNG cargo since enacting retaliatory tariffs in 2 April, according to the Vortexa tracking tool, despite demand has been almost muted since the Chinese retaliatory tariffs on US LNG in February this year. The need for less heating gas due to mild weather and sufficient inventories in northeast Asia made US LNG less competitive and kept availability in the Atlantic.
In addition to weaker demand in Asia, Qatar exported 48.8mn m³ from January-March, a quarterly record, according to Vortexa data. Half of those volumes headed to northeast Asia. Qatar's oversupply also reduces some of the global demand for US LNG, which intensifies the surplus in the Atlantic.
Also, European demand to refill stocks this year after the winter heating season might be counterbalanced by the EU's project that is likely to be approved to relax its year-end gas storage targets to 83pc from 90pc. Therefore, a large increase in demand is not expected there.
The lack of demand in northeast Asia could cause Brazilian LNG imports, already on an upward trend last year thanks to increased product availability in global markets, to rise further. Brazil regasified 8.1mn m³/d of LNG in 2024, a more than fourfold hike from 1.5mn m³/d in 2023, according to the mines and energy ministry's data.
Imports are expected to rise, according to consultancy Mirow, because Brazilian regasification capacity will grow to 147mn m³/d by 2032, from 97mn m³/d today, when new terminals start up. Also, small-scale LNG distributors in Brazil may get a boost in demand in the next two years as their on-road operations grow and become more efficient, reaching distances of up to 1,500km (930 miles).
