Wave of LNG tankers overwhelms Europe and strikes gas rates

There's only so much LNG we can export, says Again Capital's John Kilduff

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An LNG import terminal at the Rotterdam port in February 2022.

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The U.S. is exporting more LNG to Europe as an outcome of Russia’s war in Ukraine and cuts made to gas materials ahead of winter season, however there has actually been an accumulation of LNG vessels waiting to discharge at ports with European facilities not able to deal with the increased LNG deliveries.

Sixty LNG tankers have actually been idling or gradually cruising around northwest Europe, the Mediterranean, and the Iberian Peninsula, according to MarineTraffic. One is anchored at the SuezCanal Eight LNG vessels that originated from the U.S. are underway to Spain’s Huelva port.

“The wave of LNG tankers has overwhelmed the ability of the European regasification facilities to unload the cargoes in a timely manner,” stated Andrew Lipow, president of Lipow Oil Associates.

These hold-ups delay the tankers’ go back to the Gulf Coast of the United States to get the next load, according to Lipow, and as an outcome, gas stocks increase more than the marketplace anticipated.

The underlying facilities problem is an absence of European regasification capability due to a scarcity of regasification plants and pipelines linking nations that have regasification centers. As an outcome, the quantity of LNG on the water– drifting storage– boosts and in turn drives down the cost of gas

A map revealing current LNG tanker places from maritime analytics firm MarineTraffic.

“European gas storage continues to rise and now exceeds 93%,” stated Jacques Rousseau, handling director, international oil and gas for ClearView Energy Partners LLC.

Rousseau stated the boost in drifting storage, with vessels required to move capability around the world bound for longer, has actually added to an approximate doubling in LNG tanker rates year over year.

Energy professionals inform CNBC they are watching on an EU LNG cost cap. The cap was gone over last Thursday even as rates have actually boiled down. “The price cap potentially pushes traders out of the market which would impact future supply arriving in Europe,” Rousseau stated.

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European gas rates had actually overlooked 340 euros ($3326) per megawatt hour in late August, however today dipped listed below $100 for the very first time because Russia cut materials. Before the war, the cost had actually been as low as 30 euros.

Russia, which provides a big part of gas to Europe, cut gas materials as a reaction to sanctions after the nation’s war with Ukraine.