By Oleg Vukmanovic and Hugh Bronstein
MILAN/BUENOS AIRES, Sept 1 (Reuters) - Argentina isdiverting or cancelling incoming shipments of liquefied naturalgas (LNG) after mild late winter temperatures curbed fuel demandand forced state-run buyer Enarsa to rework some deals.
South America's biggest LNG importer launched back-to-backtenders in June and July after a cold start to winter, lining updozens of cargoes at bargain prices as global output continuedto outpace demand.
But a milder streak in August has undercut demand forheating fuel and left state-run LNG importer Enarsa juggling asupply overhang, according to trading sources.
Enarsa and Argentina's energy ministry declined to comment.
Stubbornly high stock levels at Argentina's two importterminals, Bahia Blanca and Escobar, also mean there arephysical restrictions on any further imports.
LNG trade sources who conduct business with Argentina say atleast four cargoes destined for Bahia Blanca have been canceledor rescheduled so far due to the downturn in demand.
"The Bahia cargoes are being targeted for cancellationbecause it is more difficult to divert Escobar shipments," oneof the sources said.
Argentina's LNG suppliers, which include major oil firms andleading trading houses, such as BP, Gunvor andRoyal Dutch Shell, can levy penalty fees of up to $5million for cancellations, one trading source said.
LNG traders dealing with Argentina demand payment upfrontdue to concerns about the level of U.S. dollar reserves in thecountry after they were run down by the former president.
Seven gas tankers are now crowded around Argentina's importterminals, live ship-tracking data shows, illustrating the scaleof the difficulties facing suppliers.
One of the Bahia Blanca-bound tankers already diverted, theMethane Alison Victoria chartered by Shell, discharged atJordan's port of Aqaba on Wednesday, according to ThomsonReuters shipping data.
Problems in the take up of LNG stretch beyond Argentina toother Latin American countries.
"LNG imports into Latin America in the first half of theyear are down by three million tonnes, or 28 percent lower thanvolumes received over the same period last year," independentLNG consultant Andy Flower said.
In Mexico, cheaper pipeline imports from the United Statespushed out LNG, while Brazil cut imports by 60 percent as heavyrainfall replenished hydroelectric reserves, he said.
In Argentina, sea-borne LNG imports declined by 15 percentin the same period. (Additional reporting by Juliana Castilla and Eliana Raszewkiin Buenos Aires; editing by David Clarke)
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