Europe is set to absorb about a quarter of global LNG supplies in September, up from less than 19% in July, as prolonged disruption to flows through the Strait of Hormuz forces the world's two largest buying regions into direct competition for the same flexible cargoes.

Deliveries to the EU and UK remain about 4% below year-ago levels on a 30-day moving average, ship-tracking data compiled by Bloomberg show, but that gap has narrowed sharply since early August, when imports ran 30% below last year. Over the same period, LNG flows to Northeast Asia fell.

The price arbitrage for US LNG currently favors Europe over Asia, traders said, giving Atlantic cargoes a commercial reason to stay in the region into October. The tanker Elisa Aquila, initially signaling a Europe-bound voyage from the US, turned in the Atlantic last week and is heading south, according to Bloomberg shipping data.

The missing Persian Gulf supply is the root of the squeeze. The region provided roughly a fifth of global LNG before the Iran war, and its absence pushed prices to their highest level since late 2022 earlier this month. Northeast Asian spot prices traded around $25-$26/mmbtu amid persistent demand.

India is emerging as Europe's most aggressive rival for spot cargoes. Indian imports are set to climb 10% in September from a year earlier, according to Kpler, as dry weather curbs hydropower output and fertilizer plants demand more gas. Indian buyers keep lifting spot cargoes even above their usual purchasing threshold. Indian Oil bought a DES cargo for 2H October-1H November delivery in the $26/mmbtu range.

In Southeast Asia, PetroVietnam Gas is seeking one DES cargo for October 23-30 delivery at the Thi Vai terminal in southern Vietnam, with bids due September 28.

China, by contrast, is stepping back. Its 30-day moving average for LNG imports stood at 167k tons on September 27, roughly 12% lower than a year earlier.

Tanker market responds

Atlantic spot earnings for a 174k cubic-meter LNG carrier hit $34,000/day on Friday, up 15% from the previous session, according to Spark Commodities, which calculates round-trip values including hire, ballast bonus and lump-sum estimates. Pacific spot earnings held at $31,000/day. For owners, the divergence reflects cargo rebalancing toward the Atlantic basin; for charterers, it signals firmer tonnage costs heading into the winter reloading cycle.

US feedgas flows support the supply side for now: estimated flows to all US export terminals reached about 19 bcf/day on September 27, up 3.5% week-on-week, according to BNEF.

Europe's storage gap

Europe's structural vulnerability remains storage. Levels were roughly 70% full on September 23, far below the five-year seasonal average of about 86%. Since 2022, the region has leaned on LNG to refill inventories and replace pipeline gas after Russia's invasion of Ukraine. The widening shortfall against the seasonal benchmark means European buyers will likely keep bidding aggressively for flexible US cargoes through the fourth quarter, sustaining pressure on the arbitrage in Europe's favor.

Futures ease, geopolitics doesn't

Prices cooled modestly on Friday. Japan-Korea Marker futures for November delivery fell 2.1% to $25.815/mmbtu on Nymex, with the December contract down 4.3% to $24.80. Northwest Europe Marker futures for October delivery dropped 2.1% to $26.505/mmbtu, and the November contract slipped 1.1% to $23.965. Gulf of Mexico FOB LNG for November fell 1.1% to $22.86/mmbtu on the Abaxx Exchange.

The geopolitical backdrop keeps a floor under the market. Eight US Marines were injured when an Iranian cruise missile struck a vessel they were operating aboard in the Strait of Hormuz earlier this month. Two Iran-linked oil supertankers interdicted by American naval forces early in the war are weeks away from reaching the US, where authorities plan to seize the vessels and their crude cargoes. Ship-to-ship transfers in the Gulf of Oman, already stretched to their limits after Saudi Arabia diverted Red Sea exports into the region, add further congestion risk around the strait.

BloombergNEF analyst Han Wei sees one potential relief valve: if Qatar ramps up output and prioritizes South Asian buyers in coming weeks, spot prices could face downside pressure. "Still, buyers would likely remain cautious as such progress could end prematurely should a re-escalation cycle returns, which happened in previous months," he said.

With European storage lagging the seasonal norm by 16 percentage points and Indian demand climbing double digits, expect the Europe-Asia tug-of-war over US cargoes to keep spot premiums and Atlantic tanker earnings elevated into the November contracting window.