By Lorenzo Monsante

Europe's post-2022 energy strategy has reduced its dependence on Russian supply, but it has not eliminated import dependence itself. Instead, more of the continent's exposure now sits in globally traded cargo markets, where flexible supply moves toward the buyer offering the strongest economics.

That shift is becoming more visible as LNG and diesel tighten at the same time. In gas, European buyers face stronger competition from Asian importers that are proving willing to remain in the spot market at elevated prices. In refined products, uncertainty over U.S. diesel exports threatens another supply channel on which Europe has become increasingly reliant.

The immediate risk is therefore less about Europe physically running out of energy than about the price required to attract the marginal cargo. Across both markets, Europe may increasingly have to outbid other buyers to keep supply flowing.

LNG: Asia is no longer stepping aside

According to the Financial Times, Platts JKM, the Asian LNG benchmark, approached $30/MMBtu in mid-September, after more than doubling since the outbreak of the U.S.-Iran war. It later traded at $25.29/MMBtu, while deliveries into Europe were priced at approximately $24.62/MMBtu, according to Spark Commodities data cited by the FT.

Those prices remain below the peaks reached during the 2022 energy crisis. Yet the behaviour of price-sensitive Asian importers appears markedly different.

Morgan Stanley analyst Martijn Rats told the FT that Pakistan and Bangladesh have purchased multiple LNG cargoes at around $25/MMBtu. During the 2022 crisis, those countries had largely withdrawn from the market at comparable prices as European buyers bid aggressively for scarce cargoes.

The significance for Europe lies in how flexible LNG supply is allocated. Unlike pipeline gas, LNG cargoes can be redirected between markets according to relative prices and transportation costs. A U.S. cargo can sail towards Europe or Asia depending on which destination offers the stronger netback.

For now, Asian spot prices are not sufficiently high to pull large volumes away from Europe. But a return of Chinese spot buying, stronger Asian winter demand or lower freight rates could improve the economics of sending U.S. LNG eastward. Europe would then need to raise its bid to retain marginal supply.

The challenge is amplified by inventories. The FT reports that the EU is preparing to enter winter with its lowest gas storage levels in at least 15 years. Europe therefore needs additional LNG precisely when competing buyers are showing greater willingness to remain in the market at elevated prices.

There are limits. Goldman Sachs analysts cited by the FT estimate that around $30/MMBtu represents a threshold some Indian industrial consumers cannot breach. The bank estimates LNG prices could reach $35/MMBtu this winter if military attacks continue to prevent regular shipments through the Strait of Hormuz.

The LNG market is therefore becoming an allocation problem: which market is willing and able to pay the most for the next available cargo?

Diesel creates a second vulnerability

Europe's exposure is not confined to natural gas.

In a separate report, the Financial Times highlighted concerns over European diesel supply following President Donald Trump's suggestion that he could support restrictions on U.S. diesel exports.

The potential impact is significant because the U.S. is Europe's largest diesel supplier. European diesel prices are already close to record highs, while Brent crude remains above $100/bbl, according to the FT.

Increased refinery output in both the U.S. and Europe has so far allowed European countries to import sufficient diesel and jet fuel despite disruptions to global energy flows. However, that buffer has become politically uncertain as the Trump administration faces pressure over domestic diesel prices ahead of the November midterm elections. U.S. Energy Secretary Chris Wright has subsequently cast doubt on the merits of a complete export embargo.

If U.S. exports were restricted, European buyers would need to source replacement diesel elsewhere. That would increase competition for cargoes from alternative refining centres and could redirect existing trade flows.

This closely resembles the mechanism developing in LNG. In both markets, the immediate issue is not necessarily that Europe will physically run out of energy. Instead, it is the price required to attract enough supply.

EU Energy Commissioner Dan Jørgensen told the FT that the most likely scenario for the coming winter involves very high prices rather than outright security-of-supply problems. For consumers and industry, however, physical availability provides limited comfort if prices become economically prohibitive.

The common thread: Europe must bid for energy

Taken together, the LNG and diesel stories reveal a broader structural vulnerability.

Europe has substantially diversified away from Russian pipeline gas and Russian refined products since 2022. But diversification has not eliminated import dependence. Part of that dependence has instead shifted towards globally traded energy markets.

LNG and seaborne diesel are flexible commodities. Cargoes can move towards whichever market offers the strongest economics, leaving Europe exposed to developments far beyond its borders. A cold winter in Asia, renewed Chinese LNG purchases, lower shipping costs or a U.S. decision to retain more diesel domestically can all influence the price European consumers ultimately pay.

The easiest demand adjustments have also largely been made. The FT reports that Asian economies have increased coal consumption and reduced gas demand following the latest supply shock. In Europe, much of the gas-demand reduction achieved after 2022 remains in place. With fewer opportunities for additional fuel switching or consumption cuts, higher prices may be required to balance the market.

Energy security begins to reshape policy

The squeeze is already influencing European energy policy.

According to the FT, the European Commission is examining a one-year postponement of new methane-emissions requirements for oil and gas importers following pressure from several member states.

The issue also intersects with LNG contracting. Asian buyers are increasingly seeking 20-year LNG agreements to reduce their exposure to volatile spot prices, while U.S. producers seek long-term buyers ahead of a wave of new liquefaction capacity.

Europe faces a difficult balance. Long-term fossil-fuel commitments can conflict with decarbonisation objectives, while excessive reliance on spot markets increases exposure to global competition during periods of disruption.

The immediate outlook will depend heavily on winter temperatures, Middle Eastern supply disruptions, Asian LNG demand and U.S. energy policy. But the larger issue extends beyond this winter.

Europe's energy security increasingly depends not only on whether sufficient supply exists globally, but on the price Europe must pay to attract that supply.

In LNG, the competition is increasingly with Asia. In diesel, the risk is losing access to U.S. barrels and having to seek replacements elsewhere.

Different commodities and different trade routes, but the same underlying exposure: when global energy markets tighten, Europe risks becoming the marginal buyer.

Sources

Financial Times, "Europe braces for LNG tug of war with Asia," 27 September 2026; Financial Times, "Brussels pushes Donald Trump to maintain 'free flow' of diesel," 25 September 2026. Market interpretation and analysis by Netback.