SINGAPORE/LONDON- Tanker rates to ship liquefied natural gas (LNG) are expected to remain firm as market players try to secure cargoes for winter demand amid soaring LNG prices and tight global supply, industry sources said.
The global LNG market has recently tightened further after the war in Ukraine and a major outage at major US facility Freeport LNG curtailed US LNG supply, pushing players to secure vessels for longer terms that extend at times to a year.
Spot tanker rates across the Pacific hit a record high at $335,000 per day in November and remained strong following Russia’s invasion of Ukraine; however, Freeport’s outage has enhanced vessel availability and helped ease prices, however it remains higher than in previous years.
“Winter coverage and (long) term is still very bullish, as people are seeing that the market might be very tight and unpredictable,” said TuomasMaljanen, Associate Director of LNG at shipbroker firm Fearnleys.
Europe’s imports of LNG so far this year has been more than 60 percent higher than its year-ago level, as the continent seeks to phase out Russian gas. On the other hand, Asian players sought to secure uninterrupted supply ahead of summer where heat wave is affecting large areas of North Asia.
LNG freight spot rates for the Atlantic were estimated by pricing agency Spark Commodities at $46,750 per day and Pacific rates at $55,500 per day on Friday.
However, Spark Commodities forward LNG freight rates for the fourth quarter of 2022 were marked at $156,000 per day, a jump from $65,916 per day in the third quarter and from $22,865 per day in the first quarter.
Longer term LNG freight for average calendar rate for 2023 were marked at $95,917 per day, with around $86,000 per day between 2019 and 2021.
The outlook for firm freight rates also come amid expectations of strong new building orders for LNG vessels, which have already surpassed 100 this year so far, said Fearnleys’ Maljanen.
“This year alone we’ve had an unexpectedly massive order book. I don’t think it’s going to end. I think the second half of this year we’re going to see more ordering done as well, This is all based on deliveries from 2026 onwards. 2025 is already fully booked,” he said.
Meanwhile, Cheniere Energy Inc has asked the Biden administration to exempt it from limits on emissions of cancer-causing pollutants, arguing they would force the top US exporter of liquefied natural gas to shut for an extended period and endanger the country’s efforts to ramp up supplies to Europe, according to documents reviewed by Reuters.
The request imposes an uncomfortable dilemma on President Joe Biden’s administration as it tries to balance efforts to slash pollution from the fossil fuel industry against promises to help European allies cut energy ties with Moscow over its invasion of Ukraine.
Denying Cheniere could reduce America’s LNG exports for months or years, while granting its request would mean ongoing emissions of toxic pollutants into poor and minority neighborhoods Biden has vowed to protect.
Texas regulators have already given Cheniere’s massive LNG plant on the outskirts of the Gulf Coast city of Corpus Christi a pass for overshooting emissions limits on other pollutants, according to previous Reuters reporting.
The request also reflects a huge financial vulnerability for Cheniere and its shareholders at a time it has been enjoying increased sales and a rising stock price.
