SINGAPORE (ICIS)--LNG vessel storage utilisation to capture contango on the forward curve has been extensively exercised by traders since October and could continue to the end of the year, trade sources told ICIS.
“Traders that were able to secure their tonnage early on were able to lift volumes from Europe and will likely float some of the cargoes until December,” one shipbroker said. Despite the cost of reload charges and the daily boil-off, some traders are capable of capturing a hefty profit margin, another source said. One play among some traders was to capture a spread on the basis of delivering a European re-export cargo to Asia and floating it for a period of at least one month.
A look at the trade
As an example, the 159,800cbm Kita LNG, currently under the control of Switzerland-based energy trader Vitol, had lifted a cargo from the French Montoir terminal on 12 September. It is currently positioned off Singapore with the intention of discharging in northeast Asia at some point in mid-December. “This is not a distressed position. The cargo has a destination,” a shipbroker said.
This means that the cargo will float for nearly three months before arriving to an end-buyer. The 162,000cbm Adam LNG, currently under the control of Switzerland-based energy trader Trafigura, is pursuing a similar strategy. The vessel is awaiting off Singapore after having loaded in Northwest Europe. China’s state-owned CNOOC is taking the 150,000cbm Neo Energy to lift a cargo from Indonesia’s Bontang LNG facility on 10 November, according to LNG Edge. The cargo was purchased on spot basis and will be stored aboard the vessel for discharge later in the winter, one source said.
Shipping costs and margins
A window of opportunity seen in September and early-October positioned these trades through the opening of a wide arbitrage spread on the forward curve. Traders that could hedge their exposure to hub prices in Northwest Europe were also able to capture customers in northeast Asia. “These trades came down to the cost of shipping positions. The margins are likely to be healthy for most,” a trader said. An estimate of current storage plays in the Pacific basin has ranged from seven to thirteen at present. “It’s hard to identify some of these, as traders are marketing them for optimisation,” the trader added.