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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Europe’s Scramble For Oil And Gas Is Causing A Tanker Shortage

  • Europe is attempting to buy as much oil and gas as it can ahead of winter, which has resulted in tankers having to travel further distances and make few voyages.
  • The LNG carrier shortage is particularly acute as much of the fleet has already been booked for winter when demand is expected to climb, especially when Freeport LNG restarts.
  • At the same time, traders are putting an increasing amount of crude and fuel in floating storage, which is making the tanker market even tighter.

As Europe looks for oil, gas, and fuels from anywhere but Russia, a shortage is developing on the tanker market, Bloomberg has reported, as vessels carrying fossil fuels for Europe have to travel longer distances and fewer voyages.

As a result, freight costs are elevated, too, with the cost of sending a tanker of U.S. liquefied natural gas to China at the highest level since 2020, the report notes.

The LNG market is suffering the most, according to industry executives, because the fleet of LNG carriers is already quite limited. Also, these vessels have already been booked for the winter as shippers anticipate a spike in demand for LNG during peak demand season. They are also preparing for the restart of Freeport LNG, scheduled for November.

On top of all this, traders are putting more crude and fuels in floating storage, Bloomberg also noted. This is contributing to a tight tanker market, about to get tighter as demand for fossil fuel-carrying vessels rises.

Earlier this month, in another report, Bloomberg noted traders were in a rush to secure as many ice-class tankers as they could in anticipation of the EU embargo on Russian crude. The embargo will see Russian crude heading in non-European directions and a lot of it would likely use the Northern Sea Route.

In addition to this, tanker building has slowed down in the past few years, further contributing to the tightness of the market at a time of a looming demand spike. This suggests a strong further upward potential for tanker freight prices, adding to energy costs for importers.

According to traders, cited by Bloomberg, Asian economies are especially vulnerable to the adverse effects of the situation if they want to import oil and gas from the U.S. at a short notice since this might be not possible once heating season kicks in.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on September 20 2022 said:
    Europe is free to look for oil, gas and fuels anywhere in the world but without Russian crude and petroleum products it won’t go far. Moreover, the fact that there is a shortage of oil tankers speaks volumes about the robust global demand for oil.

    The global LNG market is extremely tight with the bulk of LNG exports by the main producers Qatar, US and Australia already locked in long term agreements years ahead with customers in the Asia-Pacific region.. LNG tankers are overwhelmingly owned by the major producers. That is why the EU will continue to pay staggering prices for LNG imports, that is, if it finds the tankers to bring the LNG to Europe.

    Moreover, the maximum LNG both Qatar and the US can ship to the EU doesn’t exceed 30 billion cubic metres (bcm) a year or 14% of Russian combined piped gas and LNG exports in normal circumstances.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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