LNG Gas Shipping Prices Dropping

Imports of liquefied natural gas (LNG) are at their lowest level since October 2009.   LNG traders are benefiting from the lowest shipping rates in five years and the rising prices to store it on tankers and profit from it when gas prices go up in the coming months.

An analyst from the London based Drewry Shipping Consultant Ltd tells us that costs to buy an LNG cargo in Trinidad & Tobago, store it on a ship for a month and transport it to Britain costs £3.07 per million British thermal units.   If we compare with July’ delivery prices of £4.21 per million on London’s ICE Futures exchange, gas traders are having a 39%  profit margin, that is excluding import terminal and regasification expenses.

As European buyers stockpile for winter and North Sea extractions wanes, July’s UK gas prices are up 24%, which is also making LNG more viable at the moment.

Two other reasons are pushing LNG shipping prices to reach lower rates. First the number of vessels in the global fleet has increased considerably as newer vessels were introduced, and second, demand declined from South Korea and Japan, two of the world’s largest LNG importers.

“The spot charter rates are low, so storage on ships will happen and is happening,” said Keith Bainbridge, a partner at shipbrokers RS Platou LLP in London.

Last winter it costed more than £30,000 a day to transport LNG into Britain, today these shipping costs declined to £20,000 a day, the lowest price since 2005.

“Lower storage costs mean traders can lock in gains by selling into the forward U.K. market and holding cargoes until delivery.” said a shipping consultant.

“Available LNG liquefaction capacity exceeds current LNG demand by an uncomfortably large margin,” concluded an independent gas trader.

Meanwhile according to reports from Bloomberg there are about 30 liquefied natural gas tankers in the Gulf of Oman, more precisely in the coast of Fujairah in the United Arab Emirates. These vessels represent about 13% of the world’s floating LNG capacity, with a combined capacity of about 135 billion cubic feet of natural gas.

Qatar, the world’s biggest producer of LNG, was idling at least eight tankers in the Gulf of Oman, according to ship-tracking data from AIS Live Ltd. as of June 3rd.  The vessels have a combined capacity of 1.8 million cubic meters, enough to supply the U.K. for more than a month.

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1. In talking about Trinidad, the author seems totally oblivous to the economic logic. The last cargo that came out of TT on FOB basis is selling at a strong premium to Henry Hub. It’s very risky and expensive to store a cargo as it requires hedges and the boil off has to be accounted for. The profit marings mentioned are ridiculous.
   If available liquefaction exceeded demand, where are all the spot cargoes floating around?

   Comment by Roman Kazmin — June 25, 2010 @ 12:11 pm

2. UK Business Gas Price Manipulation…

   I think this type of market manipulation goes on all the time, how would this effet prices, if this was put into the system now. It would redce them instantly, and the demand would increase, so no body would lose out either way….

   Trackback by socialwebcms.com — June 26, 2010 @ 6:17 am

3. LNG Gas Shipping Prices Dropping…

   Kind of shows just how manipulated the energy markets are in the uk, when you understand like everything else, that this is for profit, does the best interest of business come in to play? i suspect not, but these companies are now to big, and are bigge…

   Trackback by social.weehz.com — June 28, 2010 @ 4:57 am

4. I hate the fact that we cannot do anything about the price of oil considering the fact that we are suffering a lot from it… I just hope oil deregulation law has never existed but we are being tortured really.

   Comment by Deena — February 15, 2011 @ 3:06 pm

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