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Atlantic LNG: Spot charter rates continue lower

  • Märkte: Natural gas
  • 05.03.20

Spot charter rates in both basins fell on Thursday, despite an open inter-basin arbitrage for spot US fob loadings that could lift global tonnage demand.

The day rate for a tri-fuel diesel-electric (TFDE) vessel fixed west of Suez on a spot basis fell to $37,000/d from $38,000/d, but retained its $500/d premium to east of Suez rates which also slipped to $36,500/d from $37,500/d.

Spot charter rates have fallen significantly in recent weeks, as ample supply from charterers seeking to sublet spare capacity undercut owners' offers weighed on the market.

Lower spot freight costs coupled with stronger northeast Asian des prices to open the inter-basin arbitrage for US fob cargoes loading over April-September, which could encourage quicker inter-basin LNG flows.

The geographical location of the US relative to its primary demand markets means that its export projects typically have the greater tonnage demand in the global LNG marketplace. And delivery from the US to northeast Asia requires around a month each way, twice as long as the journey from the US to Europe. This means that a significant increase in US volumes leaving the Atlantic basin could both buoy tonnage demand and, in some cases, discourage firms from subletting vessels, curbing the level of supply offered at a discount to other forms of freight supply.

Much of US liquefaction capacity is tied to long-term contracts with northeast Asian buyers, meaning that significant volumes loaded at the exporting country's liquefaction projects leave the Atlantic basin, irrespective of whether the inter-basin arbitrage is open or not. But with sustained weak demand in northeast Asia, these buyers have noted that they could begin selling into Europe instead when this arbitrage is held shut, cutting a component of global freight demand seen by some as structural.

But it is unclear whether northeast Asian prices will remain at a sufficient premium to European des prices for firms to secure the additional shipping capacity to deliver volumes to northeast Asia instead of Europe, market participants said.

European delivered prices have already begun to tighten their respective discounts to the Dutch TTF gas hub, and unverified rumours that Petrochina has declared a force majeure on at least some of its LNG supply contracts cast uncertainty about China's appetite for quicker receipts of Atlantic-loaded LNG.

The firm's parent company CNPC did say on Thursday that it has stopped withdrawals at its ten storage sites since the start of the month, with one site reverting to injections. CNPC had planned to withdraw around 9.6bn m³ of gas this winter, but only reached 72pc of this target before halting withdrawals.

But with the northeast Asian des curve in contango, Chinese buyers may instead be encouraged to secure prompt LNG cargoes to meet some of the country's gas demand, rather than withdrawing now and having to replace at least some of its storage volumes with more expensive LNG this summer.

And China's LNG buyers may have tariff-free access to US LNG in coming months, as they submit applications to the Chinese customs commission for a waiver of the 25pc tariff imposed on US LNG exports.


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