LNG Tankers Clog Up Atlantic Shipping Lanes To Resupply Fuel-Starved Europe

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by Tyler Durden
Monday, Dec 27, 2021 - 08:51 PM

Update (1551ET): European natural gas futures plunged for the fourth consecutive session on expectations that a flotilla of liquefied natural gas (LNG) tankers from the US will resupply the fuel-starved continent. 

Bloomberg data shows 20 tankers are headed to Europe, up from 15 on Saturday. Fourteen other tankers are headed towards Europe but have yet to commit and are waiting for final destination orders. 

A map of the US-EU shipping lane shows a line of LNG tankers headed for Europe. 

Benchmark Dutch front-month gas plunged as much as 19% to 90 euros per megawatt-hour but recovered some losses at the end of the day and closed around 98 euros.

The plunge in gas prices has been on the anticipation of increased LNG supplies from the US. Power prices have also retreated, which is a good sign for consumers and businesses. However, the energy crisis in Europe is far from over as stockpiles remain well below seasonal trends.

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European natural gas futures have been halved in the last several sessions as news of a US flotilla of liquefied natural gas (LNG) is inbound for the fuel-starved continent, and mild temperatures have materialized. 

Benchmark Dutch front-month gas plunged as much as 19% to 90 euros per megawatt-hour on Monday, a sharp decline of 50% since last Wednesday when prices topped 180 euros on declining Russia flows to the continent. 

For context. European Nat Gas has plummeted from an equivalent crude oil barrels costs of $350 to below $200... and so has plenty of room to fall further.

And the massive blowout spread between US and EU NatGas has more than halved in the last few days...

Shipping data compiled by Bloomberg shows that ten vessels are headed to the fuel-starved continent while another 20 ships are crossing the Atlantic but have not determined their final destination. 

As we've noted, commodity traders are taking advantage of massive arbitrage opportunities in Europe and diverting shipments of LNG from Asia to Europe to take advantage of the hefty premium on gas amid an energy crisis stemming from declining flows from Russia. 

Mild weather has also been another recent development, pressuring gas prices lower. The average Northwest Europen temperature jumped will above average through Jan. 8. 

A combination of new gas supplies and mild weather has sent German power for next month tumbling as much as 36% to 220 euros per megawatt-hour as gas becomes less expensive to produce electricity. 

Even though the flotilla of LNG cargo is a temporary relief for the continent, there is no end in sight for Europe's energy crisis.

Zero pipeline space was booked for Monday on day- ahead auctions to deliver natural gas through Mallnow in Germany, where Russia's Yamal-Europe pipeline terminates, according to the Regional Booking Platform. Russia Doesn't Book Any Gas Capacity at Mallnow for Monday Russia's Gazprom isn't booking the route because it has no requests from European clients, Russian President Vladimir Putin said Dec. 23. The company doesn't plan to offer spot gas at its electronic sales platform this week either, it said on Monday. It hasn't offered spot gas on the platform since the start of November. - Bloomberg 

The wild ride for European gas and electricity prices is unlikely over as the Northern Hemisphere winter has just begun.