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Soaring prices and demand for liquefied natural gas (LNG) in Asia have pushed spot LNG freight rates to over $200,000 per day as traders scramble to book vessels to ship the fuel to energy-starved markets in Asia.
A vessel to carry LNG from Gladstone, Australia, to Tokyo is now assessed at a time charter rate of $262,215 per day by the Baltic Exchange, Lloyd’s List’s Michelle Wiese Bockmann writes in an analysis.
The Pacific spot LNG freight rates have jumped this week to the highest premium on record over Atlantic rates, driven by a lack of Pacific vessels, strong cargo demand globally, and lack of new tonnage heading to Asia given strong European cargo prices, LNG freight assessor Spark Commodities said.
“There are very limited spot vessels so if there is a prompt vessel requirement for those lifting (free-on-board) then the potential cargo margin could mean the rates could go much higher,” Spark Commodities’ chief executive officer Tim Mendelssohn told Reuters.
LNG tanker rates have more than doubled this month alone amid high demand for vessels in the energy crisis, industry sources told Reuters.
The spot LNG freight rates have doubled both in the Pacific and the Atlantic basin amid a global energy crunch ahead of the winter as utilities in the northern hemisphere stock up LNG for heating in the coming months.
The wide price difference between the U.S. natural gas benchmark Henry Hub and the soaring prices of LNG in Europe and Asia is a boon to traders who are earning profits from cargo arbitrages of over $100 million.
For example, LNG shipping firm Flex LNG, listed in Oslo, said this week in a presentation at a Danske Bank Natural Gas Seminar that “cargo is king” and that LNG cargoes are providing massive arbitrage. One LNG cargo from the U.S. Gulf Coast to Japan earned an arbitrage of $124 million, while another LNG cargo from the U.S. Gulf Coast to Europe yielded a $100 million arbitrage, according to Flex LNG.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com