Multiple tankers loaded with liquefied natural gas (LNG) are currently circling the Spanish coast, awaiting higher EU energy prices to unload their shipments.
Ships carrying LNG have been accumulating off the coast of Spain over the past several weeks, as suppliers eye a lucrative trading strategy whereby they wait for gas prices in Europe to increase before unloading cargo. The price of natural gas slumped to the lowest since June, falling by over 25% in one week due to a combination of above-seasonal weather and recouped stockpiles, with the EU’s storage facilities now sitting at almost 95% capacity, according to data from Rystad Energy.
“If one single idling vessel discharges its cargo, the price will immediately collapse by affecting the other cargoes in the queue and this domino effect is so painful in terms of opportunity cost,” said an individual familiar with the matter, as quoted by Reuters. If the ships wait until December instead of November to unload the LNG cargo, suppliers could rake in tens of millions of more dollars in profit, Michelle Wiese Bockmann from shipping journal Lloyd’s said to the BBC.
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The accumulating backlog of LNG-carrying cargo ships is also largely due to Europe’s lack of LNG storage capacities. Over the summer, a number of EU nations went on a LNG shopping spree to hastily replenish their reserves over fears of gas supply disruptions from Russia. However, given that the EU has always relied on piped gas for its energy needs, the bloc’s existing storage and regasification facilities are unable to process the influx of LNG supply.
Information for this briefing was found via Reuters and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
