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Dozens of methane tankers have been waiting for several days in European waters to unload their cargoes of liquefied natural gas. But European countries are struggling to absorb all this supply, especially since their gas reserves are already full and their consumption is lower than expected. A waiting situation that traders could take advantage of.
As European countries have been preparing for weeks for energy stresses this winter, a traffic jam of gasoline-laden ships has been building in their waters for more than a week. “Dozens of ships” carrying liquefied natural gas (LNG) float off the coast, the Wall Street Journal noted, waiting to be unloaded ashore at European regasification terminals.
The BBC reports, for its part, that of the 268 methane tankers listed in the planet’s waters in October, 51 are currently near Europe. The Old Continent should even receive 82 ships loaded with gas in all of October, according to Bloomberg, 19% more than in September.
So quantities of gas are piling up offshore: About 2 billion cubic meters (or 1.45 tons) of LNG was still waiting to be offloaded on October 25. “A new record in five years”, according to the company Kpler, specialized in the analysis of data on raw materials.
“Bottlenecks can occur at European terminals, but they are relatively rare and are usually due to weather or maintenance issues, and certainly not at this level,” explained Charles Costerousse, an analyst at Kpler, interviewed by the specialized site Natural Gas. Intelligence.
“Gas buying frenzy” and insufficient number of LNG terminals
This unprecedented situation in European waters is partly explained by the summer that has just passed. In the context of the war in Ukraine, the EU countries were looking for alternatives to imports of Russian gas – which have fallen sharply in recent months – to spend the winter.
The import of LNG is one of the various preferred energy supply sources to remedy this situation, with the United States as the main partner. By June, Washington had already exported some 39 billion cubic meters of gas to Europe, exports that “almost tripled,” as European Commission President Ursula von der Leyen said in July.
The European institutions agreed last May to require Member States to have at 1Ahem November gas stocks at least 80% full. The summer race for energy supply has clearly exceeded the initial objective. As of October 19, several countries have exceeded 90% occupancy: more than 99% in France, more than 96% in Germany or even more than 94% in Italy.
This “gas buying party”, in the words of BBC investigative analyst Fraser Carson, Wood Mackenzie, may partly explain the current bottlenecks of methane tankers in European waters.
To this are added several other factors, starting with European industry, several sectors of which -steel, fertilizers- have reduced their economic activities in recent weeks due to the rise in gas prices.
The energy sobriety decided in several European countries in recent weeks and the mild temperatures in October have also led to a drop in gas consumption – about 14% in France since Augustaccording to the Minister for the Ecological Transition Agnès Pannier-Runacher-, which has the effect of lowering the reserves of European countries less quickly than expected.
Added to this is the fact that Europe has around thirty LNG terminals for regasifying LNG. But this amount of infrastructure is currently not enough to meet current demand and therefore ships are waiting to access these facilities on land.
Volatile gas price and “contango”
The combination of nearly full gas reserves and lower-than-expected consumption resulted in lower gas prices. At the beginning of the week you had to spend less than 100 euros to buy a megawatt hour, a level not seen since June, but prices remain twice as high as at the beginning of the year.
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However, energy prices (oil, gas and electricity) are very volatile in the current environment and could rise again quickly, especially in the event of a harsh winter.
LNG carriers waiting in European waters would then have an important role to play, especially as European gas reserves could be rapidly depleted in difficult weather conditions. For Germany, for example, current stocks are “just enough to meet demand through two months of cooler weather, so Europe will have to continue to attract LNG shipments,” notes the Wall Street Journal.
This situation of swimming between two waters does not displease the traders either: why unload LNG now if the prices are going to rise again soon? “(They) prefer to wait until winter to sell their gas, when demand is expected to be stronger and therefore prices will increase. This way, they would make more money selling their cargo in a few months than in a few.” weeks”. “, explains Les Echos.
With these LNG-laden ships at Europe’s doorstep, a market situation has arisen for traders: ‘contango’, when the future price of a commodity is higher than the current price. A financial opportunity that could pay more: Michelle Wiese Bockmann, editor and market analyst at Lloyd’s List shipping newspaper, tells the BBC that if she expects delivery in December instead of November, the difference in earnings could be on the order of tens of millions of dollars per shipment.
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