At least ten cargoes of liquefied natural gas (LNG) have recently been diverted from Asia to head west drawn by Europe’s record high prices amid supply concerns ahead of peak winter demand, industry sources said.
European and British benchmark wholesale gas prices soared to record highs on Tuesday as Russian gas shipments to Germany through a major transit pipeline reversed direction and colder weather boosted demand.
Prices fell on Wednesday but remain elevated partially on profit taking and also as market players realise more LNG is coming to Europe, calming supply concerns.
Refinitiv Eikon data showed one Nigerian and at least two U.S. LNG cargoes have been diverted toward Europe while sailing through the Indian Ocean.
Two cargoes onboard Minerva Chios and Maran Gas Vergina were redirected towards the Suez Canal, while the Nigerian LNG cargo onboard LNG Finima II was redirected to France, Refinitiv data showed.
“With European gas storage remaining significantly below recent years, the underlying picture continues to be driven by fears over where the gas will come from if demand for gas in Q1 22 is very high,” said Robert Songer, LNG analyst at data intelligence firm ICIS.
“In contrast, demand has recently been easing somewhat in Asia – for example, Japanese storage remains at high levels – which has pushed LNG spot prices there below the European TTF benchmark. European gas trader attention remains laser-focused on flows from Russia,” Songer said.
In addition to the above cargoes, a U.S. cargo onboard Marvel Crane had headed toward Panama bound for Asia before being diverted northeast and now signalled it was bound for the UK’s South Hook terminal, according to ICIS LNG Edge.
Data Intelligence firm Kpler said it has listed more tankers diverting towards Europe form Asia and Other destinations like Brazil including British Contributor, Tembek, LNGShips Manhattan, LNG Alliance and are eying two more for possible route change.
Furthermore, West African cargo onboard Maran Gas Sparta, a vessel chartered by Shell, has been called back to Europe after it was on the cusp of passing the Cape of Good Hope, said Felix Booth, head of LNG at energy intelligence firm Vortexa.
“In many cases cargoes are turning around in the middle of a voyage and heading to the highest price markets in Europe, as the market differentials have extended beyond $4/mmBtu,” said Felix Booth, head of LNG at energy intelligence firm Vortexa.
He added that this reversed the typical winter LNG market structure, with Europe being the most attractive market for flexible cargos, after Asia has typically held this title during the coldest months.
The Yamal-Europe pipeline, a key route for piped Russian supply to Europe via Germany, reversed flow to head east. The Kremlin said there was no political backdrop to the change and two large German customers said Russian gas producer Gazprom was meeting its supply obligations.
The average LNG price for February delivery into Northeast Asia rose on Friday to $43.35 per metric million British thermal units (mmBtu), up $7.55, or 21.1%, from the previous week, industry sources said, tracking strong gains in Europe.
Last week French power giant EDF shut down some nuclear plants following the discovery of faults and Germany’s energy regulator said certification of the new Nord Stream 2 gas pipeline from Russia would not be completed in the first half of 2022, fuelling concerns over winter supply.