Europe warned of LNG squeeze as Asia competes for limited global gas supplies

Europe faces intensifying competition from Asia for liquefied natural gas (LNG) supplies this summer, raising the risk of higher prices and exposing structural weaknesses in the EU’s fragmented energy procurement system, according to analysts and officials, according to Politico.

The pressure is building as European storage levels lag the five-year average and traders struggle with weakened incentives to refill reserves during a period of elevated summer prices. Under EU rules, member states must fill gas storage to at least 80% of capacity by December, but this year’s conditions are complicating that target.

Asian demand is emerging as a key variable. Countries including China, Vietnam, South Korea, Thailand and Vietnam are expected to increase spot market purchases as air conditioning demand rises during a hotter summer. Analysts say this could place Europe and Asia in direct competition for cargoes, particularly in the spot market where prices respond immediately to demand spikes.

TotalEnergies CEO TotalEnergies Patrick Pouyanné warned lawmakers in France of mounting market stress. "We're in for a period of tension," he said, arguing that Europe would be exposed if it failed to secure sufficient supplies. "I don't see prices going at 2022 levels, but I don’t expect prices to drop like they did for fuel."

The European Union attempted to improve its negotiating position after Russia’s invasion of Ukraine by launching AggregateEU, a coordinated gas purchasing platform. However, participation was uneven and major importers largely bypassed it. A German energy executive said: "While several negotiations were initiated, they did not result in completed transactions." The platform has since been decommissioned, though officials are considering reviving it.

A senior EU official described the constraints facing Brussels in blunt terms. "It's every man for himself," the official said, highlighting the bloc’s inability to centrally allocate cargoes or compel companies to coordinate purchases.

The structural contrast with Asia is becoming more significant. Analysts note that more centralised or state-directed economies can instruct firms to secure supplies during periods of volatility, while Europe relies on decentralised private buyers operating under competition rules.

POLITICO reported that EU officials are monitoring the risk of renewed competition closely, particularly if Asian buyers return aggressively to the spot market. “In crisis situations, markets that are more authority-driven can tell a few companies: ‘Just do the job,’” said another EU official.

China remains a key swing factor. After drawing down reserves in recent months, it has so far acted as a stabilising force in LNG markets, but analysts warn it could re-enter the spot market more aggressively if domestic stocks tighten, intensifying competition with Europe.

If Asian demand and European storage refill requirements coincide, traders warn of a transcontinental scramble for LNG cargoes that could push prices higher and further strain the EU’s ability to meet winter storage targets.