European LNG, natural gas divergence widens on Atlantic cargo overhang
The European LNG and natural gas markets diverged to a record level Sept. 30 as a glut of Atlantic cargoes struggled to find a home because of a lack of buying interest and high storage levels.
In addition to the oversupply, the decoupling reflects intra-European and inter-basin economics, as well as shipping rates, being such that arbitrage opportunities are said to be limited. Regasification slot capacity for prompt cargoes in Europe also is currently limited.
DES Northwest Europe for November was assessed Sept. 30 at $28.664/MMBtu, down $6.832 on the day. The $25.05/MMBtu discount versus the Dutch TTF hub front-month price eclipsed the previous record discount of $24.475/MMBtu Aug 26.
“The market is really depressed and not many buyers,” said an Atlantic-based trader. “But sellers are floating their cargoes until November-December.”
A November cargo into Spain was heard traded at TTF minus $30/MMBtu.
“There are no alternatives available where you can deliver the LNG cargoes. The stop-loss is Far East minus shipping,” a second Atlantic-based trader said, noting that other European gas hubs, such as NBP are also very weak.
Sources have said there is a significant overhang of cargoes, with little slot capacity for deliveries in October and into November. The West-East freight cost differential has also widened; US Gulf Coast-NWE LNG’s most-economic freight is currently $2.91/MMBtu, while the cost from USGC-East Asia is $6.53/MMBtu. The difference, or additional freight to East Asia, is $3.62/MMBtu. That differential is about $1/MMBtu wider than a month ago.
“Hearing storage full in Spain, France, Japan,” said a third Atlantic-based trader. “Koreans [are] not buying, so demand [is] very low. So, home for cargoes in the prompt is difficult. That’s why discounts [are] so big.”