Per reporter: Zhang Lingxiao Per editor: Gao Han
Image source: Photo Network - 500711835
On February 8, local time, according to the data of Spark Commodities, a LNG freight price assessment agency, spark30S (Atlantic) LNG (liquefied natural gas) spot transportation assessment price fell to -750 US dollars / day, which is the first time since 2019 that the assessment index has fallen to negative values.
Tim Mendelssohn, managing director of Spark Commodities, said there are now too many LNG vessels on the U.S.-Europe route due to the frenzied influx of U.S. LNG to Europe, and there is an oversupply. Negative charter fees highlight that "fuel costs for returning ships to the port of loading are not included in current ship charter payments".
Vivek Srivastava, senior trade analyst at VesselsValue, a major shipping intelligence firm, told the Daily Economic News that more than 60 LNG carriers that were supposed to sail from the United States to Asia suddenly turned around and turned to Europe, most of them arriving in January, a situation that led to a surge in seaborne imports of liquefied natural gas into northwestern Europe, which currently exceeds 14 million cubic meters.
According to the Nihon Keizai Shimbun, in January 2022, European LNG imports increased to four times that of a year ago. Changes in the European LNG market have led many U.S. LNG suppliers to Europe. Financial information firm Refinitiv data shows that in January this year, Europe became the top destination for U.S. LNG exports, surpassing Asia for the second consecutive month. About 66 percent of U.S. LNG exports went to Europe in January, up from 61 percent in December. The data also shows that LNG imports in Europe reached about 11 million tons in January this year, an increase of 4 times that of the same period last year, half of which came from the United States.
Behind the diversion of LNG spot suppliers to Europe is the huge arbitrage space brought about by Europe's high LNG prices and soaring demand. In terms of prices, in October and November 2021, gas prices in Asia averaged $5/MMBtu higher than in Europe, while in the second half of December, European gas prices were $6/MMBtu higher than in Asia, the largest spread ever. Europe's current wholesale natural gas prices have risen to five or six times what they were in early 2021.
On the demand side, since the beginning of winter last year, Europe has suffered from severe cold weather and its energy supply crisis has intensified. Europe has been facing a shortage of Russian gas shipments this winter, with Gazprom's exports to the EU falling to nearly 6 million tonnes in January, down 40% from the same month last year. In order to ensure regional energy security and cope with the decline in Russian gas supply, Europe has chosen to import a large amount of LNG to make up for the shortage of inventories.
Vivek Srivastava analyzed to the "Daily Economic News" reporter that compared with Europe, where demand has risen sharply, in contrast, the Asian region has declined due to multiple factors such as the new natural gas pipeline from Russia to China and the milder winter temperatures in the past two months.
When it comes to the changes that will occur in the recent LNG spot shipping assessment price, Vivek Srivastava said that shipping rates may remain low. Based on current vessel navigation data, the total amount of LNG imported from the U.S. to Europe this month is expected to drop to 10 million cubic meters compared to last month, but at Sabine Pass, the Atlantic designated loading terminal at Spark30S, about 67 sols of LNG vessels will currently be loaded within 15 days.
Natural gas prices in Europe are still soaring. Natural gas futures at the Dutch TTF Center opened above $25/MMBtu on the morning of February 10, while Henry Center Natural Gas in the United States closed at just $4.18/MMBtu on Feb. 9.
But at the same time, every reporter noted that Japan, Indonesia and other countries in the Asian region have said that this year is obviously affected by the La Niña phenomenon, and the winter weather is more humid and cold. It is predicted that the effects of La Niña may last into March or even April. According to S&P Global, some analysts believe that there is no shortage of narrowing the price difference between Asian and European LNG prices, and traders are once again turning their ships to Asia.
Daily economic news
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