Several prompt-delivery Atlantic LNG cargoes have reportedly been diverted to Asia due to sluggish demand in Europe amid unseasonably mild weather and healthy gas storage levels. Shipping companies are understood to be seeking a home for their cargoes, as more than 30 tankers – laden with $2 billion combined worth of LNG – are idling off Europe’s shoreline.
The number of LNG tankers queuing off northwest Europe and the Iberian Peninsula has doubled over the past two months, according to the shipping analytics company Vortexa. And another 30 tankers laden with US LNG are currently crossing the Atlantic and are likely to join the queue – unless diverted to the Pacific basin.
Anxious European buyers had been snapping up LNG at almost any cost to substitute cut-off Russian gas, refilling storages to near maximum levels prior to the winter. According to Gas Infrastructure Europe, gas storages in Belgium are nearly 100 percent full, sites in France at 99 percent and in Germany at 98 percent capacity – leaving almost no room for additional LNG purchases.
Though high freight costs make some sellers think twice about diverting their cargoes to Asia, many are prepared to swallow that extra cost rather than keeping their vessels afloat in the Atlantic basin. If winter comes late in Europe and the LNG tankers cannot discharge their cargoes, they could be late for their next scheduled loading and risk paying penalties.
A proposed EU-wide price cap along with joint purchased of gas and LNG would make sellers shift supply to Asia. Qatar’s energy minister Saad Al Kaabi openly dismissed the European proposal to cap LNG prices is "hypocritical", according to media reports. He said, although Qatar has pledged to not divert LNG cargoes from Europe, nothing is permanent.
It is premature to say whether Asia will once again become a premium LNG market, with much depending on weather patterns. “So far, Asian importers have not had a need to pull volumes away from the Atlantic Basin into the Pacific. But the big question is if we get some weather-related demand which could conjure up a need for Asia to start a ‘price war’,” Jeffrey Moore, Platts’ head of Asian LNG Analytics said in a podcast.
Just one single Chinese buyer seems to seek spot cargoes for December to January delivery already now, but towards the end of this winter, large national energy companies will return to the spot market to fill gaps in supply.