LNG traders have had LNG cargoes depart from the United States to Asia and make an abrupt turn in the Atlantic toward Europe, where gas prices are higher and demand is greater with winter weather and the halt of Russian pipeline gas supply via Ukraine.
At least seven U.S. LNG cargoes that were en route to Asia via the Cape of Good Hope have made abrupt U-turns in the South Atlantic this month and are now headed to European receiving terminals, according to data from commodities analysts ICIS quoted by the Financial Times.
“It’s unusual to see so many course changes, and so many obvious about-turns,” ICIS’ LNG market analyst Alex Froley told FT.
Europe’s benchmark natural gas prices remain high, allowing for profitable LNG cargo trades, unlike in Asia, where the average LNG spot price for March delivery fell to $13.90 per million British thermal units (MMBtu) last week, according to industry sources quoted by Reuters. That’s lower compared to the $14.00 per MMBtu price assessed in the previous week, and the second consecutive week of falling Asian spot LNG prices.
In Europe, the Dutch TTF price, the benchmark for gas trading, hit earlier this week levels last seen in October 2023, amid the halt of Ukrainian gas transit, and the sub-zero temperatures in many of the biggest gas-consuming economies in northwest Europe that are depleting storage levels at the fastest pace in eight years.
LNG vessels divert to Europe as the U.S. LNG arbitrage to Asia remains closed, Spark Commodities said last week.
Europe’s TTF day-ahead prices for January remain high, and Spark’s assessment of the U.S. arbitrage for February 2025 shows the arbitrage to Asia remains closed at -$0.845/MMBtu, “indicating that US vessels continue to be incentivized to deliver to NW-Europe as opposed to NE-Asia,” the commodities analysts said.
This week, Spark Commodities said that the U.S. front-month arbitrage to northeast Asia via the Cape of Good Hope has remained negative since July, signaling that U.S. cargoes are incentivized to stay within the basin and deliver to Europe instead of Asia. This is the longest period that the U.S. front-month arbitrage has remained negative in the last 3 years, according to Spark Commodities.
By Tsvetana Paraskova for Oilprice.com
