LNG Bunker Snapshot: Prices surge as Middle East crisis deepens

LNG bunker prices jumped in Rotterdam and Singapore as Middle East tensions and attacks on Qatari infrastructure tightened supply.

Weekly changes in LNG bunker prices:

• Rotterdam up by $151/mt to $1,198/mt
• Singapore up by $290/mt to $1,294/mt

Rotterdam

Rotterdam’s LNG bunker price has climbed to $1,198/mt, supported by an almost 16% increase in the assessed LNG bunker premium, which rose from $136/mt to $157/mt.

Prices were further underpinned by an approximately 14% gain in the front-month Dutch TTF Natural Gas contract, the key benchmark for European gas markets.

The TTF rise came “due to increased withdrawals from underground gas storage and continued turmoil in the Middle East,” according to the Japan Organization for Metals and Energy Security (JOGMEC). It also surged “following an attack on LNG production facilities in Qatar on 18 March, raising concerns about disruption in the global LNG market,” JOGMEC added.

“European natural gas prices surged… comes as the market digests the impact from Iranian attacks on Qatari LNG infrastructure,” two analysts from ING Bank commented.

“European natural gas prices surged last week after Iran’s attack on the Qatar LNG facility took offline more than 17% of supply from Qatar, the world’s biggest producer. Following Israel’s airstrikes on Iran’s South Pars natural gas field, missiles damaged the Ras Laffan gas plants in Qatar. The impact is likely to be long term, with the restoration of production likely to take more than three years,” said ANZ Bank’s senior commodity strategist Daniel Hynes.

Market participants are increasingly expecting LNG prices to remain elevated. Over the past three weeks, the Hormuz crisis had been viewed as a “shipping disruption.” Last week, it has shifted into “an infrastructure story”. Earlier assumptions suggested that “when the conflict ends, production restarts,” but physical damage has altered that outlook. Damaged infrastructure requires repairs before operations can resume, explained Hendrian Sukardi, LNG market analyst at ENN Energy.

“Qatar's Ras Laffan facility - which supplies 20% of global supply - has been shut for weeks. Two of its fourteen trains were damaged and will take up to 5 years to repair,” said Stephen Stapczynski, Energy Asia team leader at Bloomberg News.

“We will stay in unprecedented market conditions with a challenging environment for price guidance for a rather protracted period,” predicted Mind Energy, formerly Energi Danmark.

EU underground gas storage stood at 28.5% as of 20 March, down from 29% a week earlier and 16.1% lower than the same time last year, according to Gas Infrastructure Europe.

Singapore

Singapore’s LNG bunker price has risen by $7/mt over the past week, driven by “supply concerns due to continued turmoil in the Middle East,” according to JOGMEC. The agency also noted that “an attack on LNG production facilities in Qatar,” contributed to the upward momentum.

“In the immediate term, the current crisis has almost certainly erased a global gas glut that was widely expected from this year,” said Bloomberg News’ Stephen Stapczynski.

“Meanwhile, the Strait of Hormuz effectively remains shut for LNG trade. This is further throttling LNG supplies from the Persian Gulf to Europe and Asia,” Stapczynski added, contributing to upward pressure on the benchmark.

LNG bunker prices in the region are generally tied to the NYMEX Japan/Korea Marker (JKM), whose front-month contract increased by $5.52/MMBtu to $21.71/MMBtu, equivalent to $543/mt, over the same period.

Singapore’s previous marginal $43/mt discount to Rotterdam has now flipped into a significant premium of $96/mt within a week.

Other LNG bunker news

Gasum has renewed its FuelEU pooling agreement with Viking Line and Wallenius Sol, with their bio-LNG-fuelled vessels continuing to generate compliance surplus for its pooling service.

Polish energy company Orlen Group has taken delivery of two LNG dual-fuel carriers under construction at Hanwha Ocean’s shipyard in Geoje, South Korea.

Norwegian shipping firm Stolt-Nielsen has agreed to sell a 50% stake in bunker supplier Avenir LNG to Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK Line).

Italian shipping company GNV has carried out the first LNG bunkering of its LNG-capable vessel GNV Aurora at the Port of Genoa, Italy.

By Tuhin Roy

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