Higher demand for natural gas for the winter months has been exacerbated by a supply shock in Europe. European prices surged by just over 90% in the third quarter, to US$16.9/mmBtu, and we expect a further 10% rise in the fourth quarter, to about US$18.5/mmBtu, making for a year-on-year increase of nearly 300%. Prices in the US jumped by nearly 50%, to US$4.3/mmBtu, and are expected to rise by 11%, to US$4.8/mmBtu in the fourth quarter, making for a 91% rise in prices year on year.

Asian imports of liquefied natural gas (LNG) from the US have surged in 2020 and 2021 as major importers including China and Japan locked up available supplies. Imports up to July 2021 are nearly at full-year 2020 levels already, and are expected to rise further as China boosts natural gas consumption during the winter months.

EIU expects China to overtake Japan as the single largest importer of LNG in 2021, consuming about 22% of global LNG. Meanwhile, the US is set to become the third-largest exporter, producing about 17% of global LNG, as it caters to high demand in Asia.

As a result, European imports of global LNG are likely to continue their declining trend from 2020, falling by 6% in 2021, to 64.6m tonnes, and exacerbating the shortage of natural gas supplies in the region.

The US will benefit the most from the surge in demand for LNG, as production there is expected to ramp up by nearly 47% in 2021, and by an annual average of 10% in 2022-23.