LNG traders divert four US cargoes from Europe to Asia
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Four cargoes of liquefied natural gas headed for Europe changed course to Asia in the last two weeks, after European prices fell below the Asian benchmark and opened up an arbitrage for deliveries eastward, according to analysts and shipping data.More cargoes diverting from the Atlantic to the Pacific would increase competition between the two basins, in a year when Europe may need up to an extra 250 LNG cargoes to refill its depleted gas stores ahead of winter.A combination of improved netbacks to Asia and easing European price support, rather than stronger Asian demand, had led to a clear, if narrow, economic case for redirection, said Go Katayama, principal insight analyst at data analytics firm Kpler."JKM premiums over TTF have widened, improving netbacks for U.S.-origin cargoes," he said."This has reopened the arbitrage channel, particularly for June to July delivery windows."The Japan-Korea-Marker (JKM) is the LNG benchmark price assessment for spot physical cargoes in Asia. The Dutch Title Transfer Facility (TTF) is the benchmark for natural gas in Europe.Kpler data showed the Energy Innovator tanker, controlled by Germany's RWE, departed Freeport LNG in Texas on April 7. It was destined for Dunkirk, France before diverting towards the Cape of Good Hope on April 16.The Shell-controlled New Nature tanker also changed course from Europe to head south on April 24, after departing Sabine Pass LNG in Louisiana on April 16.Two more tankers have also seen later arrival dates, suggesting a switch in destinations from Europe to Asia which adds a couple of weeks' travel time, said Alex Froley, senior LNG analyst at data intelligence firm ICIS.The arrival date for the Orion Spirit tanker changed from April 24 to May 14, while the Pacific Success tanker's arrival date changed from April 22 to May 18, he said."The estimated time of arrival on those suggests they switched from a two-week journey across the Atlantic to a longer journey to Asia."Kpler data shows the Orion Spirit and Pacific Success, both controlled by TotalEnergies, were initially bound for Dunkirk, France and Rostock, Germany respectively.Additionally, despite its proximity to Europe, the first loading from the Greater Tortue Ahmeyim project offshore Mauritania and Senegal on the British Sponsor tanker is heading towards Asia, added Froley.Kpler data shows BP's British Sponsor is on course for Singapore."However, Europe should still continue to receive large amounts of LNG, and if storage injection rates start to slow, Europe would likely increase its prices a little to pull more cargoes back," said Froley, adding that Asian demand is not picking up strongly."The change is more about the speed at which both markets have drifted lower in recent weeks on weaker economic expectations."Asian spot LNG prices had been holding at near one-year lows since mid-April as demand remained tepid. They were last at $11.80 per million British thermal units (mmBtu) on April 25.The benchmark front-month contract at the Dutch TTF hub closed at 32.10 euros per megawatt hour on Thursday, or $10.62/mmBtu. It had closed at $10.64/mmBtu on April 25.
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