Traders Divert LNG Cargoes from Asia to Europe Amid Price Discrepancy

Recent reports show that traders have redirected several liquefied natural gas (LNG) cargoes from Asia to Europe due to higher prices in the European market and sluggish demand in Asia. This shift in LNG trade routes comes at a time when European countries are looking to secure alternative gas sources following the expiration of the Ukraine transit deal on Jan. 1.

According to data from analytics firm Kpler, at least six LNG vessels that were initially bound for destinations in Asia were rerouted to Europe between Jan. 8 and Jan. 14. These cargoes, loaded in the U.S., were originally intended for countries like China, South Korea, Thailand, and Singapore before being redirected in the Atlantic Ocean.

Martin Senior, head of LNG pricing at Argus, explained that the diversion of these cargoes was driven by the narrowing price gap between the Asian and European markets. With Asian spot LNG prices hovering around $14 per million British thermal units (mmBtu) and European prices showing more strength, traders saw an opportunity to capitalize on the price differential.

The move to divert LNG cargoes to Europe is seen as a response to the oversupply situation in Asia, where inventory levels are high, and demand is tepid. In contrast, Europe is facing increased demand for LNG as countries seek to replace Russian gas supplies. Weather forecasts predicting colder temperatures in northwest Europe further support the need for additional LNG imports.

Among the vessels that were rerouted to Europe were the Bushu Maru and Flex Vigilant, both loaded at Freeport LNG, as well as the Grace Dahlia, chartered by Glencore, which was originally bound for China but diverted to Turkey. The Diamond Gas Crystal, controlled by Mitsubishi, also changed course from South Korea to Europe after loading at Cameron LNG.

Analysts suggest that the trend of rerouting LNG cargoes may continue, with more Asian buyers reselling their supplies to Europe or within Asia. This shift in trade patterns reflects the changing dynamics of the global LNG market, where price differentials and supply-demand imbalances drive trading decisions.

As LNG prices remain elevated and domestic demand in key markets remains subdued, traders are exploring new opportunities to optimize their shipping routes and capitalize on market conditions. The recent diversion of LNG cargoes from Asia to Europe highlights the flexibility and adaptability of the LNG market in responding to evolving supply and demand dynamics.

(Source: Reuters – Reporting by Emily Chow; Editing by Florence Tan and Susan Fenton)