(The charter rates axis in the first graph and the reference to charter rates in the tenth paragraph have been corrected.)
Poor LNG vessel availability has prevented a jump in reloads out of northwest Europe, despite a current price incentive to reload.
The East Asian and South American LNG front-month indexes (EAX and SAX) climbed over $2.00/MMBtu higher than the equivalent Dutch TTF contract in October. At the beginning of September, EAX sat $0.284/MMBtu and the SAX $0.112/MMBtu above the TTF.
Higher priced Asian and South American markets typically draws a response from capacity holders at European LNG terminals. Traders bring in contractual volume, then arrange spot deals which allows their volume to be reloaded and shipped to higher priced markets.
In December 2016, the EAX premium to the TTF topped out above $4.00/MMBtu, helping to drive over 600,000 cubic metres (cbm) in reloads out of northwest European terminals.
But in October, only three reloads have been lined up in northwest Europe – one in France and two at the Gate terminal in the Netherlands.
Spain carried out its first reload in more than 14 mounts on 13 October, despite a PVB premium to the TTF (click here for story).
A lack of vessels available for short-term charters has prevented LNG traders capturing global arbitrage.
“Only a few charterers have been able to conclude deals because buyers don’t like the price [offered for the vessels],” a shipbroker said.
Two sources told ICIS on Wednesday that there are no prompt Atlantic vessels on shipbrokers’ lists. Some charterers have been trying to organise backhauls to bring ships from the Pacific to relieve pressure in the Atlantic shipping market.
The prompt charter rate of tri-fuel diesel electric (TFDE) vessels was assessed above $45,000/day on Friday. This brings rates in line with where they were in January and February ’17, when Asian premiums were high and a cold snap in Iberia forced Spanish buyers into the spot market to look for cargoes. One shipbroker quoted a charter rate above $50,000/day in both the Atlantic and Pacific basin.
In the same way that the lack of pipeline capacity will prevent a European natural gas trader from profiting from arbitrage between two hubs, a lack of vessel availability weakens the flexibility of LNG traders.
A number of participants expect Asian premiums to Europe to persist through the winter, placing strain on the shipping market.
“I understand weather is looking quite chilly out there, unlike here in Europe,” an NBP and TTF trader said, “with La Nina coming it is likely to be a chilly winter [in Asia] and all the gas encouraging measures from China. I think it is likely prices will stay high for the coming months.” email@example.com and firstname.lastname@example.org
All ICIS NBP and TTF price assessments are available in $/MMBtu on the FTP. The Day-ahead, Weekend and front-month $/MMBtu prices for both markets can be found on page 4 of the ESGM report.