LNG vessels begin to reroute away from Red Sea on rising tension

Companies that transport natural gas, including BP Plc and Norway’s Equinor ASA, are choosing to avoid the Red Sea after Iran-backed Houthi militants stepped up attacks in support of Hamas. Shipments from Qatar, one of the world’s largest LNG producers and a key supplier to Europe, continue to transit the Red Sea toward the Suez Canal, according to shiptracking data. 

The diversions are also happening at a time when the world’s other vital ocean-to-ocean waterway for LNG, the Panama Canal, is being severely restricted by drought. That means more US LNG shipments to Asia may need to take longer routes around southern Africa.

European natural gas prices jumped 7% on Monday amid growing fears of disruptions to energy flows. Still, North Asia, home to the biggest LNG importers, is well stocked for winter and buyers aren’t rushing to find alternative supplies yet, according to traders.

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The Red Sea ship attacks are a serious — though likely temporary — development, according to Fearnleys A/S. “The consequences would be too big for the economy to handle, if goods and commodities cannot flow freely through the region,” the shipbroker said in an emailed note. “Securing a safe corridor would be in most nations’ interest.”

It estimates that an average 6.6% of LNG sailings have used the Suez Canal this year.

Other spot market news:

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• Beijing Gas purchased an LNG cargo on a DES basis for Jan. delivery to China in the high-US$11 ($14.66)/mmbtu range
• Shenzhen Energy purchased an LNG cargo on a DES basis for Dec. delivery to China
• Bangladesh’s state-run Rupantarita Prakritik Gas Co. is seeking one spot LNG cargo for Jan. 17-18 delivery

Drivers:

Asian LNG prices could rise, at least temporarily, due to the Red Sea risk premium, traders said Still, disruptions in the Red Sea are unlikely to have a large impact on crude oil and LNG prices because vessel redirection opportunities imply that production should not be directly affected, according to Goldman Sachs China’s natural gas reserve capacity has improved sharply from last year, National Reform and Development Commission spokeswoman Li Chao said at a briefing, noting that demand for power and gas is now at an historic peak European gas storage was 89% full on Dec. 17, compared with the 5-year seasonal average of 78% Estimated gas flows to US LNG export terminals on Monday rose 1.5% w/w to 15.1 bcf/day, according to BNEF PGN said Indonesia’s gas demand may reach 4,862 MMSCFD in 2035 from 3,473 MMSCFD currently, President Director Arief Setiawan Handoko said on Tuesday

Buy tenders:

Company	Cargoes	Port	Delivery	Offers Due	Valid Until
First Gen	1 DES cargo	Philippines	Jan. 22-Feb. 2	Dec. 20
RPGCL	1 DES cargo	Bangladesh	Jan. 17-18	Dec. 21	Dec. 28

Vessel Rates:
Pacific spot earnings for a 160k cubic-metre vessel were US$100,750/day on Monday, down US$2,750 from the previous session, according to Spark Commodities, based on assessments from LNG shipbrokers Atlantic spot earnings were US$128,500/day, down US$5,250 from the previous session: Spark NOTE: Spark values calculated on a round-trip basis, including hire, ballast bonus and lump sum estimates

Futures Prices:
Japan-Korea Marker futures for February delivery +5.3% to US$12.395/mmbtu on Monday March contract +6.5% at US$12.060 TTF futures for January delivery +7.3% to the equivalent of US$11.370/mmbtu on Monday