LNG cargoes diverted as European prices soar

A number of LNG tankers have changed course and are heading towards Europe instead of Asia, as European prices surged to a premium of unprecedented scale to Asian markets.

At least three LNG vessels carrying US cargoes have been rerouted to Europe, shiptracking data from oil analytics firm Vortexa show. The 174,000m³ Minerva Chios loaded a cargo at the 27.5mn t/yr Sabine Pass terminal in the US on 20 November and was initially heading towards Asia, but reversed its course in the Arabian Sea on 15 December and is heading to the Suez Canal.

Similarly, the 177,000m³ Marvel Crane first headed to the Panama Canal after loading a cargo at the 15mn t/yr Cameron LNG terminal in the US, but later reversed its route and on 19 December declared for arrival at the UK's 15.6mn t/yr South Hook LNG terminal, where it is expected on 30 December.

And the 174,000m³ Maran Gas Vergina had gone as far as Indonesia with a cargo from the 5.75mn t/yr Cove Point plant in the US when it reversed its course on 17 December. The vessel was about to enter the Gulf of Aden this afternoon.

Tankers are being rerouted as European prices have climbed well above traditional premium markets in northeast Asia. The Argus northwest European front half-month des price, now referring to deliveries in the second half of January, rose above the corresponding northeast Asia price on 10 December, and has expanded its premium to a record-high $6.24/mn Btu, the largest European premium to Asia Argus has ever recorded since starting the two price assessments in April 2012. By comparison, the month-ahead northwest European des LNG assessment held an average discount of around $5.95/mn Btu during 14-18 December in 2020 against the equivalent ANEA assessment.

A stark difference between fundamentals in the two markets has underpinned the reversal of the traditional Asia-Europe arbitrage. Following a flurry of tenders ahead of the winter season, Asia now sits on ample LNG stocks and has experienced milder-than-average weather in recent weeks, which has pared consumption.

Asian LNG spot demand is muted apart from some demand from Thai state-owned Petroleum Authority of Thailand (PTT), as Asian buyers have overbooked cargoes ahead of the winter in a bid to avoid fuel shortage experienced in the last first quarter, market participants said.

In Japan, utilities' overall LNG stocks increased to 2.33mn t as of 28 November from 2.07mn t a month earlier, up by 12.6pc, energy ministry data show.

By contrast, supply availability in Europe has tightened further this week, amid faltering Russian flows and rapidly depleting underground inventories, exacerbated by unseasonably cold weather and unplanned nuclear outages in France. The Dutch TTF front-month-ahead gas price reached a fresh historic high of €146.50/MWh — or $48.55/mn Btu — on 20 December, jumping further to an intra-day high of around €187/MWh by mid-afternoon today, market participants said.

By Evelyn Lee