Europe-Bound LNG Cargoes Divert to Asia as War Upends Gas Market

A growing number of LNG cargoes that were initially en route to Europe have sharply diverted in the Atlantic toward Asia via the Cape of Good Hope as Asian buyers are now winning the competition with Europe with about 20% of global LNG supply currently offline.

So far this week, three LNG tankers, two carrying cargoes from the United States and one from Nigeria, have sharply pivoted toward Asia after signaling initially they would go to Europe, vessel-tracking data reviewed by Reuters showed on Friday.

Asia is scrambling for supply after Qatarhalted LNG production and the Strait of Hormuz is de facto closed to tanker traffic in the escalating war in the Middle East.

LNG shipments from Qatar and the United Arab Emirates (UAE), which jointly account for about 20% of global LNG supply, are now off the market, after QatarEnergy announced a pause to LNG production at its Ras Laffan hub, the world’s largest LNG complex, issued force majeure notices to buyers, and no tankers pass through the Strait.

As traffic via the Strait of Hormuz is effectively closed, the LNG supply shock to Asia is immediate as it receives a total of 85% of Qatar’s LNG exports.

Europe is feeling the secondary effects, with spot prices so high in Asia that Asian buyers now attract the flexible-destination cargoes despite soaring LNG tanker rates and the longer voyages through the Atlantic and around the southern tip of Africa toward Asia.

Other LNG exporters cannot cover the loss from Qatar and the UAE—not at this scale, and not quickly, Kpler’s Laura Page wrote in an analysis on Thursday.

Of the other LNG exporters, the U.S. and Australia already operate at high utilization rates, while Nigeria, Algeria, and Trinidad face feed gas availability constraints, according to Kpler.
So realistic supplementary supply from all alternative sources totals under 2 million tons, against a 5.8 million ton monthly shortfall, the energy analytics firm noted.

By Tsvetana Paraskova for Oilprice.com

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