Europe is still awash with liquefied natural gas despite a crash in benchmark prices as demand in Asia remains lackluster.

A few weeks ago, it became more profitable to deliver US LNG to Asia than to Europe, but that premium has been insufficient to lure cargoes away from a region that’s been flooded with the fuel in recent months.

Some 68% of the LNG exported by the US last week is headed to Europe, while 27% is en route to Asia, according to Laura Page, a senior analyst at data and analytics firm Kpler. Despite speculation that Asian demand will rise after China scrapped strict Covid restrictions, the country’s reopening has been bumpy, infections are still rife, and there’s the Lunar New Year ahead.

“Looking at truck LNG prices in China, which is a good indication of industrial demand — it’s going down, there is no rebound in activity yet,” said Arun Toora, an analyst at researcher BloombergNEF. “You need to go past the holiday season in China first.”

LNG deliveries to Europe have helped ease an energy crisis this winter after Russian piped supply slumped. But even when demand is tepid on both continents, Europe has long been considered the market of last resort, with traders standing a good chance of finding buyers in Spain, France or the UK, home to extensive import infrastructure and trading hubs.

Gas inventories in Asia — as in Europe — are currently healthy, while the weather hasn’t been cold enough to drive up consumption. Much depends on temperatures for the rest of the winter in both regions, and on industrial demand in China amid its emergence from Covid. Traders considering a voyage of at least 20 days from the US to Asia need to be sure of a reliable market.

“If there is a sudden cold snap in Asia, a considerable amount of spot cargoes could divert from Europe, but there are no signs of colder weather there yet,” Toora said. “You wouldn’t see Asian demand picking up substantially unless prices fall to $15-$18 per million British thermal units.”

To be sure, Europe’s LNG imports have softened in recent weeks, reflecting lackluster consumption and sliding prices, but they’re still above the seasonal norm. Yet Morgan Stanley, which has slashed its gas-price forecast by half, said European prices don’t need to be anywhere near the peaks of last August to attract shipments.

There are some diversions of deliveries, ship-tracking data show. One vessel appears to be rerouting from northwest Europe to Asia, and another last week switched destinations to sail to Turkey instead of the UK. 

But many tankers are staying close to western Europe — positioning that will also help them once the Freeport LNG facility in the US eventually restarts.