by: TN Media News:
“Panama Congestion Widens Asia-Europe LNG Spread to Yearlong High”
Data from S&P Global Commodity Insights reveals that the Asia-Europe liquefied natural gas (LNG) spread has reached its widest level in approximately a year.
On December 6, the spread between the Japan Korea Market (JKM) and the Title Transfer Facility (TTF) was assessed at $2.79 per million British thermal units (mmBtu), signaling its broadest since December 31, 2021.
Ongoing congestion at the Panama Canal is contributing to a risk premium in the JKM market, impacting the flexibility of LNG supply routes and making it more expensive to send U.S. LNG to Asia.
The restrictions at the Panama Canal have led LNG tankers from the U.S. to take longer alternative routes, such as the Cape of Good Hope or the Suez Canal, to reach Northeast Asia, resulting in a longer journey of about nine days.
This situation has prompted more flexible LNG supply from the Atlantic Basin to be directed towards Asia, creating a marginally higher cost for shipping due to the spread covering additional transportation expenses. However, despite this, the majority of flexible cargoes from the Atlantic Basin are still being exported to Europe due to long wait times at the Panama Canal and high inventories in Asia limiting restocking demand.
Only three U.S. LNG cargoes went via Panama to Northeast Asia/Southeast Asia in November, significantly lower than the historical average.
While Asian LNG demand has been subdued due to solid inventories, weak industrial demand, and mild weather, Europe is well-prepared for winter with record gas storage inventories and strong floating LNG storage.
The widening spread may impact shipping decisions, with the potential for cargoes to flow to Northeast Asia for late-January and early-February deliveries rather than to Europe.
