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LNG carrier rates on the spot market hit a record amid strong demand and limited supply as many opt for a long-term commitment to using the vessels.
According to a Reuters report citing industry insiders, the imbalance in the LNG carrier market was also exacerbated by sanctions on Russian energy cargo that have led to buyers seeking to avoid dealing with Russian vessels.
The spot market rate for a 160,000-cu m LNG carrier in the Atlantic Basin, for instance, are currently at $100,000 per day, according to LNG consultancy Poten & Partners. For Asia and east-of-Suez, the daily rate for such carriers is $85,000 per day.
Earlier data from Clarksons Platou Security pegged the annual charter rates for LNG tankers at $120,000 per day, which was a 50-percent increase over 2021.
"The market has exploded. It's very hard to find any ships with length [of availability] in the market. It's going through the roof," Oystein Kalleklev, owner of two LNG shipping firms, told the Financial Times earlier this month.
The problem could get worse in the coming months because carrier capacity has been tight for a while now, and there is no relief in sight. It takes several years to build an LNG carrier, and during the past two years, construction has been plagued by all the same supply chain problems that the pandemic caused every other industry, too.
Then there are new regulations on the horizon that might further shrink the supply of available tankers, the FT reported. According to the report, older LNG carriers were being frowned upon for effectively using their cargo as fuel since they run on LNG vapors.
Long-term charters are also reducing the available carrier capacity for the spot market, further aggravating the shortage.
"There has been a substantial increase in long-term charters," Jason Feer, Poten's head of business intelligence, told Reuters. "We've seen some 10-year charters that we hadn't seen for many years previous."
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.