High freight rates steer US LNG to Europe — OilPrice

Europe is increasing purchases of spot liquefied natural gas cargoes from the United States, as high transportation costs have made shipments from the Gulf Coast to Asia economically unviable. According to OilPrice, this could ease concerns over gas stocks ahead of the winter season.

Supplies redirected to Europe

As OilPrice reports, the arbitrage between the Atlantic and Pacific oceans is closed until the end of the year due to high freight rates. Under these conditions, most US spot LNG cargoes are being directed to Europe, where maritime transportation costs are lower.

Over the past month, Europe has attracted more LNG cargoes than before. According to Bloomberg data compiled from vessel tracking, deliveries to Europe were only 4% lower than a year earlier. At the beginning of August, the year-on-year decline in deliveries to the region stood at 30%.

Competition for available volumes

Limited LNG flows from the Middle East over the past seven months have led to higher gas prices in Asia and Europe. Earlier this month, quotations reached their highest level since the 2022–2023 energy crisis, as buyers compete for volumes that do not require transportation through the Strait of Hormuz.

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In spring and early summer, Asian buyers competed more actively for US LNG. Now, due to unfavorable transport economics to Asia, additional spot volumes are going to Europe, albeit at a high price.

Gas stocks below average

As of September 27, EU gas storage facilities were filled to about 70%, according to Gas Infrastructure Europe data. This is below the five-year average for this period, which stands at 86%.

In Germany, which has the world’s fourth-largest gas storage capacity, the filling level was about 57%. This has heightened concerns about supply security in the event of a colder winter than in previous years.