Wednesday, February 1, 2023
spot_img
HomeGasGlobal LNG floating storage hits record high on steep contango ahead of...

Subscribe

To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

Global LNG floating storage hits record high on steep contango ahead of winter

The number of LNG carriers being used as floating storage globally has hit a record high as oil majors, commodity traders and other energy companies hold onto LNG cargoes and vessels ahead of peak winter season, according to shipping data and shipbrokers.

The accumulation of a large number of laden LNG carriers without a fixed destination is underpinned by several market fundamentals – the steep contango between November and January that could yield a profit, regions like Europe and North Asia entering early winter with strong inventories and the possibility of a surge in demand in the event of a spell of cold weather.

The Ukraine crisis has resulted in a tight LNG market, and along with some recent supply disruptions like the one at Freeport LNG in the US, LNG cargoes are likely to be heavily sought after in the coming weeks and months, both for energy security and to boost trading positions.

There were as many as 33 LNG carriers in floating storage in the week of Sept. 19, which eased towards the end of the month but rose again to around 31 LNG carriers at the start of October, according to data from S&P Global Commodity Insights.

This is higher than the last time LNG floating storage hit a record high, at almost 30 vessels in mid-2020, when a steep contango along the forward curve incentivized traders to float their ships and hold onto the cargoes ahead of early winter procurement.

In the winter of 2020-21 there were almost no LNG carriers in floating storage as demand had collapsed due to COVID-19 and maximum floating storage in the winter of 2021-22 was only in the mid-teens, S&P Global data showed.

The current contango, where prompt prices are lower than those further out on the curve prices, is steep.

In the first half of September, when Platts JKM — the northeast Asian LNG benchmark — was being assessed for October delivery, the market structure two months forward was still in a modest contango structure. But after the assessment moved into November delivery, the contango structure strengthened significantly, with the Nov-Jan contango as wide as $7/MMBtu, which strongly supported storage economics.

Vessel shortage

Energy companies and commodity traders have been accumulating LNG carriers for a storage play for several months. As early as mid-2022, market participants were indicating that 6-12 month charters for LNG carriers had become very popular, and by the third quarter spot LNG vessels were already hard to come by.

Strong demand for storage has also created a shortage of LNG vessels and contributed to the current surge in spot LNG freight rates, which have risen to around $300,000/day from under $50,000/day in a span of 45 days.

“Charterers still have a close eye on the contango into December and January, and hence interest on tonnage that can cover winter months remains strong, thereby elevating the forecast rates further,” shipping brokerage Fearnleys said in its latest weekly report.

The brokerage said that in the west shippers are focusing on demand for two-stroke LNG vessels, but that availability is almost non-existent, especially when market players are awaiting further updates on the outage at Freeport LNG and do not wish to reveal their market length.

“It is a very tight market. There are only some steam turbine LNG vessels available but they are not the ideal candidate for floating storage as such ships will have much more boil-off,” an LNG ship broker said. Boil-off refers to the LNG that is lost due to vaporization during storage.

The broker said there are no vessels available with ship owners and charterers have to rely on sublets, if any are available, andthe freight rate is really up to the company that is controlling shipping assets.

“In the past seven to 10 days, due to scarcity of two-stroke vessels in the market, even the steam turbine ships have been considered by traders who really want to float the cargo,” another broker said, adding that with the market in contango, traders no longer care about the cost.

Source: Platts

Related Posts

Video

Finance & Economy
Shipping News
Ports

Wartsila: A challenging year with strong annual growth

HIGHLIGHTS FROM OCTOBER–DECEMBER 2022 Order intake decreased by 24% to EUR 1,638 million (2,150)Service order intake increased by 6% to EUR 791 million (747)Net sales...

Hapag-Lloyd achieves extraordinarily strong result in its anniversary year 2022

On the basis of preliminary and unaudited figures, Hapag-Lloyd has concluded the 2022 financial year – in which it celebrated its 175th anniversary –...

Bahri sees profits soar in 2022

Saudi Arabia’s Bahri has seen its profits soar by over 400% in 2022 following a boom in tanker rates, boosting the shipping giant’s oil...

Euronav Files Second Arbitration Against Frontline

Euronav NV hereby informs its shareholders that on 28 January 2023 it has filed an application request for arbitration on the merits in relation...

Oaktree looking at block sale of existing shares in Hafnia Limited

OCM Luxembourg Chemical Tankers S.à r.l. which is ultimately controlled by funds managed by Oaktree Capital Management L.P. (the "Seller") has retained Fearnley Securities,...

Baltic index logs worst month in 3 years

The Baltic Exchange’s main sea freight index registered its biggest monthly percentage fall in...

Baltic index snaps 9-day losing streak as panamax, supramax rates rise

The Baltic Exchange’s main sea freight index snapped its nine-session losing streak on Tuesday,...

Cyprus shipping making waves – report

Cyprus shipping, the steady driver of the economy, is sailing for better times, having...

Baltic index hits fresh multi-year lows on capesize dip

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk...

Baltic index falls for seventh session on lower capesize demand

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk...

Port of Long Beach Closes 2022 with Second-Busiest Year

The Port of Long Beach marked its second-busiest year on record by moving 9.13 million twenty-foot equivalent units in 2022, allowing for a return...

Hapag-Lloyd AG acquires share in J M Baxi Ports & Logistics Limited

Hapag-Lloyd AG signed a binding agreement today under which it will acquire 35% of J M Baxi Ports & Logistics Limited (JMBPL) from a...

Nigeria opens ‘game changer’ billion-dollar deep seaport

Nigeria opened a billion-dollar Chinese-built deep seaport in Lagos on Monday, which is expected to ease congestion at the country’s ports and help it...

SC Ports handles nearly 3 million TEUs in record 2022

South Carolina Ports had a record 2022 with the most containers ever handled at the Port of Charleston. SC Ports moved nearly 2.8 million TEUs...

January oil loadings from Russia’s Baltic ports set to jump 50% vs Dec

Urals and KEBCO crude oil loadings from Russia’s Baltic ports of Primorsk and Ust-Luga in January are set to rise by 50% from December...