Wave of LNG tankers is devastating Europe

Due to cuts in natural gas supplies imposed in advance of winter and Russia’s conflict in Ukraine, the U.S. is exporting more LNG to Europe, but the European infrastructure is unable to handle the increased LNG exports, causing a backlog of LNG ships waiting to unload at ports.

According to recent data, sixty LNG tankers have been at anchor or travelling slowly through northwest Europe, the Mediterranean, and the Iberian Peninsula. The Suez Canal has one anchored there. Eight LNG ships from the United States are currently en route to the Huelva port in Spain.

“The wave of LNG tankers has overwhelmed the ability of the European regasification facilities to unload the cargoes in a timely manner,” said Andrew Lipow, president of Lipow Oil Associates.

Lipow claims that because of these delays, the tankers’ trip back to the US Gulf Coast to pick up the subsequent load is delayed, causing natural gas inventories to increase more than the market anticipated.

The lack of European regasification capacity resulting from a lack of plants and pipelines connecting nations with regasification facilities constitutes the underlying infrastructure problem. As a result, there is more floating storage—LNG—on the ocean, which lowers the price of natural gas.

“European gas storage continues to rise and now exceeds 93%,” said Jacques Rousseau, managing director, global oil and gas for ClearView Energy Partners LLC.

According to Rousseau, the growth in floating storage, which has resulted in vessels needed to carry capacity around the world being tethered for longer, has caused LNG tanker rates to roughly double on an annual basis.

Energy experts have noted that they are monitoring a price ceiling on EU LNG. Even if prices have decreased, the cap was addressed last Thursday. The price cap might drive traders away from the market, which would affect the supply that comes to Europe in the future, according to Rousseau.

Late in August, the price of a megawatt hour of gas in Europe had risen beyond 340 euros ($332.6), but last week it fell below $100 for the first time since Russia cut supplies. The cost had been as low as 30 euros prior to the war.

As a result of sanctions following its conflict with Ukraine, Russia, which supplies a significant amount of natural gas to Europe, reduced gas exports.