By Oleg Vukmanovic
MILAN (Reuters) - Collapsing demand for Spanish LNG exports caused by global gas prices converging is trapping more supply in the country's domestic market amid a halving in pipeline gas imports from France.
Spain may only export one LNG cargo over the next two months, according to schedules published by gas grid operator Enagas, as the once booming trade struggles to turn a profit.
Enagas lists four potential LNG re-exports from Spain in May, but of those only one is confirmed, at the country's Sagunto terminal.
Another two cargoes may be loaded in June, it said in a separate provisional schedule.
While Spain does not produce any LNG, it has Europe's biggest import capacity.
Economic woes have left Spain little choice but to re-load LNG cargoes it did not need for export to more profitable destinations such as Asia and South America, connecting disparate markets and becoming a proxy for global demand.
The cancellation of two provisional Spanish reloads in March marked a second straight month of the trade grinding to a halt for the first time since 2012 as prices in Asia fell to five-year lows.
It also raises doubts about the current crop of potential export cargoes announced by Enagas, whose fate likely depends on whether spreads with top buyers in Asia recover enough to make the trade profitable, traders said.
Asia's spot LNG price premium over European gas prices recovered slightly this week to $0.75 per million British thermal units (mmBtu), but still lags far behind the $7.50 per mmBtu one year ago.
Around 20 empty LNG tankers are idling off the Spanish coast awaiting orders, accounting for five percent of the global fleet, according to live ship-tracking data on Reuters Eikon.
The convoy may partly reflect a drop in Spanish re-export demand and shows how a flattening Europe-Asia price spread is more generally slowing LNG diversions from Atlantic production plants to Pacific consuming markets.
Cargo diversions from Atlantic to premium Pacific markets has been one of the predominant themes of LNG trading in recent years.
Spain's absorption of growing LNG volumes comes in tandem with sharply reduced pipeline gas imports from France.
Spain's intake of mainly Norwegian gas coming through France halved in April to 52 Gigawatt hours/day, or 5 million cubic metres (mcm), compared with March levels, data from French grid operator TIGF shows.
Spain is expected to take even less French gas heading into the summer. One analyst said he expects Spain to import 2 billion cubic metres (Bcm) of gas from France this year, well below 2014 levels.