By Emily Chow
SINGAPORE- Three liquefied natural gas (LNG) cargoes on course for Europe have been diverted to Asia to meet stronger Asian demand and as gas prices in Europe have eased, according to analysts and shipping data.
The quick change in course reflects agility of trading firms in sending LNG supplies to Europe or Asia, whichever pays, as colder weather increases competition between the two regions for the fuel used in power generation.
The arbitrage window to send US and African LNG to Asia opened as Asian prices rose to $15.10 per million British thermal units (mmBtu) on Friday, the highest this year, driven by colder weather in North Asia.
The benchmark front-month contract at the Dutch TTF hub closed at 47.50 euros per megawatt hour on Friday, or a lower $14.72 per mmBtu.
The spread was enough to cover the additional spot freight costs for delivering US LNG to Asia via the Cape of Good Hope instead of Europe, said Samuel Good, head of LNG pricing at commodity pricing agency Argus.
This shift is supported by record low prompt spot charter rates, he added.
Vessels that have diverted back to Asia include Shell’s LNGShips Empress, BP’s Aristos 1 and Mitsubishi’s Diamond Gas Victoria, according to the analysts and Kpler data.
“We’ve seen three already, but there’ll be many more with the arbitrage deemed open,” Good said.
LNGShips Empress departed Sabine Pass in the US state of Louisiana on Nov. 11 and appeared to be heading to Asia, said Alex Froley, senior LNG analyst at data intelligence firm ICIS. It diverted to Europe in mid-November before diverting back to Asia a week later.
Meanwhile, Aristos I left Nigeria’s Bonny Island on Oct. 31. It went around the Cape of Good Hope towards Asia, came back west into the Atlantic, and is now heading back east again, he added.
“We’ve seen at least a couple of cargoes switching back to Asia after initially diverting towards Europe, although the bulk of diversions in the last couple of weeks were towards Europe,” said Froley. – Reuters
