Since first writing 50/50, then One Fuck Up After Another, I’ve continued to position for the knock-on effects of Ras Laffan being damaged and remaining largely offline. Positioning in both LNG and thermal coal continues to look like a great risk-reward here.
“The way the European Union advances is one dramatic crisis at a time”
-James Aitken (timestamp)
Hope is not a strategy, yet it appears to be the European Union’s energy policy, which reminds me of SoftBank’s slides (packed with optimism and short on numbers).
I won’t rehash this piece, but the quick summary is:
Qatar accounts for ~25% of Asian LNG under fixed-destination contracts (89% of Qatar’s 81 Mt went to Asia in 2025), while Qatar accounts for only ~8% of EU LNG.
With Ras Laffan still largely offline (recent extension of force majeure to early September for Edison), the stage is set for Asian LNG (JKM) and EU LNG (TTF) to enter a bidding war over US LNG with ‘destination flexible contracts’ as Asia enters peak cooling and the EU needs to catch up on gas storage.
Dutch TTF Natural gas and Japan/Korea Market (JKM) have remained ~50% above pre-war levels since the war began, and with the recent spike, JKM is now close to double pre-war levels.
This is important, as destination‑flexible LNG cargoes can and do get diverted mid‑voyage toward the highest bidder (see the above green line; JKM has traded at a premium to TTF throughout this war, bar a short period at the start).
Asian buyers don’t look likely to ease up with Qatar extending force majeure and one of their LNG carriers taking a drone hit while they have already drawn down LNG stocks.
This recent increase in demand has been driven by growing LNG restocking requirements in China and resilient demand across South Asia, particularly in India, Pinto told Euronews.
BCA Research has a great dashboard which breaks down the transits by vessel types, and you can see LNG tankers were steadily picking up in June before the recent attacks ground them to a complete halt.
The EU’s “Hope for the Best” Strategy
“Our view is that market participants are holding onto the expectation of a gradual resumption of LNG exports from the Middle East over the summer. This would ease prices and free up additional global LNG supply, allowing Europe to secure cargoes at lower prices in September and October, and potentially even during the winter,” Pinto said.
Or via meme
EU is now tracking 2021 storage levels while Asia continues to outbid EU buyers.
EU LNG imports were 57% US LNG in 2025, while US LNG is only ~8% of Asian LNG (remembering the majority of US LNG is destination-flexible).
In short, since the Asian market lost its fixed-destination LNG contracts (Qatar), they are grabbing all the flexible-destination US LNG it can (and burning more coal).
This doesn’t bode well for the EU playing catch-up like in 2018.
Gas storage is the EU’s ‘seasonal battery’, covering between a quarter and a third of consumption. Similar to charging an EV at night when electricity rates are off-peak, the EU looks to refill its gas storage during the summer months when LNG is cheaper due to low demand.
There is no mandate to force buying* other than EU storage targets which have been lowered from 90%, to 80% and now 70% for some members.
*Italys MASE decree which is best described as socialising the negative spread, so you get front-loaded, price-insensitive buying and has Italy sitting at comfortable storage levels.
Compounding the issue, renewables are increasing system fragility in the winter months.
Take Germany: in June 2025, solar accounted for 27% of electricity generation, while in peak winter in January 2026, it was 3.38%. Wind is not very seasonal but also has periods of ‘Dunkelflaute’: Germany’s stretch of weak wind output is set to drag on into 2026. The balance has to come from a mix of LNG, coal, and increasingly imports (from which countries like Norway are facing their own low hydropower issues).
Lastly EU Banning Russian Gas
EU Commission clarifies all Russian LNG trade is banned from 2027 for EU operators.
April 25, 2026: Ban on short-term Russian LNG contracts (Removed ~2% of the total EU gas imports).
June 17, 2026: Ban on short-term Russian pipeline gas contracts (Removed <1% of total EU gas imports).
January 1, 2027: Ban on long-term Russian LNG contracts (removes an estimated ~4.7% of the total EU gas imports).
September 30, 2027, ban on long-term Russian pipeline contracts (remove an estimated ~5% of the total EU gas imports).
The big reductions are on January 1st 2027, and September 30th 2027, which I’d expect to get pushed out.
China’s Back Buying
The Chinese stepping back from both crude and LNG imports was the single biggest reason energy prices were more contained than many (including myself) had thought.
China is the most flexible major LNG buyer in the world, and roughly 45% of its LNG imports are short-run substitutable (via pipeline gas, domestic production, coal-fired switching, and storage drawdown to absorb the loss).
With that said, China’s absence from the LNG market has been short-lived, even with JKM LNG prices still elevated to the tune of ~50% (June) to ~90% as of today; they are back buying.
This may be partly due to limited gas storage (~50 days of average demand).
Storage levels were around 46% at the end of May, below the five-year seasonal average, and are expected to fall further by end-June, Katayama said. “This leaves China with a relatively thin inventory buffer ahead of July and August, supporting continued spot LNG purchases.”
Hot weather is the key driver of demand.
While I don’t see us revisiting the crazy price levels of 2022 (unless Ras Laffan takes more ballistic missiles), I can easily see us revisiting late 2021 LNG pricing ($30-50MMBTU) in the October -December period (unless Europe gets a warm winter).
