Brazil’s LNG competitiveness narrows as prices converge versus Europe, Med

Brazil’s LNG competitiveness versus Europe and the Mediterranean has narrowed as Brazil’s premium weakens despite an expected uptick in imports this month.

Platts, part of S&P Global Commodity Insights, assessed DES Brazil for deliveries 15-to-45 days forward at $9.722/MMBtu, or at a 2.2 cent/MMBtu discount to June Northwest European LNG.

This was also a 0.3 cent/MMBtu premium to the Mediterranean marker.

The discount to NWE was the lowest level recorded since the assessment began on Feb. 1, while the differential versus the Med was the weakest seen since Jan. 31.

Although the market has been eyeing the growing demand from Brazil, Northwest European buyers were heard to be aggressively bidding to attract cargoes away from other regions.

The market is eyeing an uptick in demand from Latin America and should reservoir levels be lower than expected, LNG demand could rise in the coming months with Latin American players looking to outbid Northwest European buyers, traders said.

Several LNG traders said they were keen to send their cargoes to Brazil and Argentina over NWE if prices rose as expected.

“Brazil imported 13 million cu m/d of LNG over the last 30 days, an increase of 7 million cu m/d (116%) compared with the previous 30 days due to unusually low levels of rainfall during the wet season,” an S&P Global analysts’ report said April 17. “This has resulted in reservoirs having water levels lower than forecast, with levels at 72% in the Southeast region, 14% lower than levels recorded in April 2023.”

The report added that energy demand in Brazil was increasing, with TSO the National System Operator (ONS) forecasting demand of 80,053 MWa, an 8.2% increase compared with last year, for the country’s power grid, the National Interconnected System (SIN). Despite these challenges, the ONS has forecast an improvement in the hydrological scenario for the Southeast/Central-West region, which holds 70% of the reservoirs most relevant to the SIN. Inflows are expected to reach 85% of the long-term average (1932–2023).

Buying interest is seasonal in the region, and with brewing demand imports could see stronger support. Brazilian LNG imports this month stood at 180,000 mt as of April 18, according to data from S&P Global. This was already near the 190,000 mt seen for the whole month of May. The entire volume arrived from the US.

On the year, Brazilian LNG imports stand at 830,000 mt so far in 2024, compared with 40,000 mt in 2023 and 1.37 million mt in 2022 over the period Jan. 1 to April 18.
Source: Platts