LNG tankers reroute to Europe amid soaring demand and profits
Tankers carrying liquefied natural gas (LNG) are increasingly changing course in the Atlantic, heading to European ports. This shift is due to the growing demand for gas in Europe, prompted by the loss of Russian pipeline supplies through Ukraine and cooler weather, reports "Financial Times".
According to data from ICIS, at least seven LNG tankers, which were initially set to deliver cargoes to Asia or Colombia, have changed direction and are heading to Europe. These changes highlight the dynamic situation in the gas market, which has been undergoing significant transformation since the war in Ukraine began in 2022. Russia halted gas flows through Ukraine, contributing to the expiry of a key transit agreement and forcing Europe to seek alternative supply sources, it says.
The economic viability of LNG supplies to Europe
Data from Spark Commodities indicates that sending LNG to Europe in January yields a profit of up to $5.3 million (CAD 7.6 million) more per shipment compared to deliveries to Asia, where demand remains low. This makes Europe an attractive market for LNG suppliers, especially given high TTF futures prices, which reached 50 euros (75.3 Canadian dollars) this week.
Two of the redirected tankers are currently heading to Turkey, from where the gas can be further transmitted by pipelines to southeastern Europe, the region most affected by the end of Russian supplies through Ukraine.
Europe increasingly reliant on LNG
According to Gas Infrastructure Europe, European gas storage was filled to 59% as of January 15 – 15% less than a year ago. The International Energy Agency (IEA) forecasts that reduced Russian pipeline gas supplies will lead to a 15% increase in LNG imports to Europe.
"The global gas market balance remains fragile" – stated the IEA in its report. Although the halt of Russian supplies through Ukraine does not directly threaten the EU's energy security, it may increase reliance on LNG and affect price increases in the longer term.
According to "Financial Times", forecasts from Energy Aspects indicate that by the end of March, gas reserves in Europe could fall to 38 billion cubic metres, which is about 35% of total storage capacity. It is estimated that by the summer of 2025, as much as 35% of stockpiles will come from LNG.
Any major disruption to global LNG supply or a slow ramp-up of the new export facilities coming online in the US or structural growth in Asian demand could undermine this stock build – warns James Waddell from Energy Aspects.
