LNG traders divert cargoes to Asia from Europe as demand in the east increases
Analysts and shipping data indicate that three LNG cargoes bound for Europe were diverted to Asia in order to meet the stronger Asian demand, and because gas prices have decreased in Europe.
The rapid change of course shows the agility of the trading firms to send LNG supplies either to Europe or Asia.
As Asian prices rise, the arbitrage window for sending U.S. and African Liquefied Natural Gas to Asia opens.
The benchmark front-month contracts at the Dutch TTF Hub closed on Friday at 47.50 Euros per megawatt hour, or $14.72 less per mmBtu.
Samuel Good, the head of LNG prices at the commodity pricing agency Argus, explained that the spread was sufficient to cover any additional spot freight costs incurred by delivering U.S. LNG via the Cape of Good Hope to Asia instead of Europe.
He added that the record low rates of prompt spot charters are a major factor in this shift.
Analysts and Kpler data indicate that the LNGShips Empress of Shell, BP's Aristos 1, and Mitsubishi's Diamond Gas Victoria are amongst those vessels which have returned to Asia.
Good stated that "we've already seen three, but we'll see many more as arbitrage is deemed to be open."
Alex Froley is a senior LNG analyst with data intelligence firm ICIS. He said that LNGShips' Empress left Sabine Pass, in the U.S. State of Louisiana, on November 11 and seemed to be headed to Asia. The ship diverted to Europe mid-November, before returning to Asia one week later.
Aristos I, meanwhile, left Bonny Island in Nigeria on October 31. The ship went round the Cape of Good Hope and headed towards Asia. It then turned back to the west, into the Atlantic. Now, it is heading eastwards again.
Froley said that "we've seen at the least a few cargoes switch back to Asia, after originally diverting towards Europe. Although the bulk of the diversions over the past couple of weeks was towards Europe."
Only two weeks ago, five LNG cargoes from Asia were diverted to Europe due to higher European gas prices, after Russia's Gazprom stopped supplies to Austrian OMV.
Froley said that this could be due to Asian prices gaining some strength against Europe or companies reassessing their portfolios following the initial reaction.
Diamond Gas Victoria left Lake Charles, Louisiana on November 16. Kpler data and LSEG showed that it appeared to be headed towards Europe, before turning towards Cape of Good Hope. It is now destined for Taichung in Taiwan.
Good stated that "not all cargoes bound for Europe or planned loadings to sail there can be diverted back to Asia when the arbitrage opens again." This is especially true of those cargoes destined to Europe's floating regasification and storage units, which have overlapping regasification plans with other terminal users. (Reporting and editing by Florence Tan, Saad Sayeed and Emily Chow)
(source: Reuters)
