Asia is stocking up on liquefied natural gas (LNG) to avoid a repeat of last winter’s crunch when colder than usual temperatures sent 2020/2021 winter spot LNG prices to records.
Now prices are even higher, but many Asian buyers are still on the spot market despite the expensive gas in the global energy crunch. Surging demand for LNG and increased shipments of U.S. gas to Asia, including China, are sending spot LNG freight rates in the Asia Pacific region to new records.
This week, Pacific spot LNG freight rates jumped above $300,000 per day to a new record high, as rates in both the Pacific and Atlantic basins continued to move sharply higher, LNG freight assessor Spark Commodities said.
The spot price for LNG tankers to deliver fuel in December in the Pacific region jumped to an all-time high of $316,750 per day, up by 9 percent compared to the previous week. This beat the previous record for spot LNG rates set last winter when a cold snap in Asia drove LNG prices and freight rates to records.
Those records were beaten in the past few weeks when spot LNG prices in Asia jumped to well above $30 per metric million British thermal units (MMBtu) last month. Now LNG freight rates have also exceeded last winter’s all-time highs and are five times higher than in early September.
At the same time, the spot LNG freight rate in the Atlantic basin jumped by 5 percent from the previous week’s assessment to $254,250 per day this week, according to Spark Commodities data.
Soaring prices and LNG demand started to push spot LNG freight rates to over $200,000 per day in October, as traders scrambled to book vessels to ship the fuel to energy-starved markets in Asia. LNG tanker rates more than doubled in October alone amid high demand for vessels in the energy crisis, industry sources told Reuters at the time.
Higher demand in Asia and a jump in U.S. exports to the region, including to China, will likely keep the LNG tanker market tight throughout the winter, analysts and industry executives say.
“There has recently been more demand in Asia for U.S. LNG, but that also means more demand for ships to bring LNG to the Pacific,” Joseph Sigelman, CEO at gas and LNG logistics firm AG&P Group, told Bloomberg this week.
“The situation for ships will remain tight through the rest of winter,” Sigelman added.
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Moreover, hoping to avoid a repeat of last year’s congestion in the Panama Canal, buyers in Asia are also booking LNG tankers to travel from the United States to Asia via the Cape of Good Hope, which is a longer voyage that further tightens the LNG vessel market, traders told Bloomberg.
Near record U.S. exports of LNG and record shipments to China in recent months have also raised the demand for tankers to carry the super-chilled fuel to Asia.
After a year without U.S. LNG shipments to China between March 2019 and February 2020, due to the trade war, American exports to China started rising toward the end of last year to reach a record high in August 2021, the latest available EIA data shows.
In September 2021, China was the top destination of U.S. LNG exports, the U.S. Department of Energy’s LNG Monthly for November 2021 showed. China received 48.6 Bcf of U.S. LNG in September, followed by Brazil, South Korea, Spain, and Turkey. Those top five countries of destination accounted for 61.4 percent of all American LNG exports in September, according to the DOE data.
So far in November, the volume of gas feeding to U.S. LNG export facilities has been higher than in October and near the monthly record from April 2021, per Refinitiv data cited by Reuters. So far in November, the volumes of gas flowing to U.S. export plants have averaged 11.1 Bcf/d, up from 10.5 Bcf/d last month and slightly down from the April monthly record of 11.5 Bcf/d.
By Tsvetana Paraskova for Oilprice.com
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