Cargo shipments of Liquefied Natural Gas (LNG) from Nigeria are being diverted to Asia following the sudden stoppage of exports from Qatar, which has sent natural gas prices soaring by 50% from year-ago levels across Europe and Asia, according to a report by Reuters.
Panicked buyers are now seeking out replacement cargoes, as statistics from analytics firm Kpler showed that the LNG tanker BW Brussels, which loaded a shipment at the Nigeria LNG Bonny Island Terminal on February 27, initially signalled a westward journey toward Europe.
The cargo, however, altered its route and headed south toward Asia via the Cape of Good Hope.
This is as European gas prices soared as much as 30 per cent on Monday. Middle East war roiled energy markets and spurred fears of prolonged supply disruptions.
The Dutch TTF natural gas contract, considered the European benchmark, jumped to 69.50 euros before paring gains slightly.
Asia’s benchmark LNG price surged sharply last week as the ongoing conflict between the United States and Iran and a production suspension in Qatar tightened global supply.
The benchmark Japan-Korea Marker for spot LNG cargoes jumped by 68.52 per cent to $25.393 per million British thermal units for April delivery last Tuesday, its highest level in three years, according to S&P Global Platts.
In comparison, spot LNG prices for deliveries to northwest Europe rose by about 57 per cent to $15.479 per mmBtu for April, reflecting a strong rally but still leaving Asia as the more lucrative destination for flexible cargoes.
Market analysts said the widening price spread between Asia and Europe has opened arbitrage opportunities for traders to redirect LNG shipments from the Atlantic Basin to Asian buyers willing to pay a premium.
“So far, one LNG tanker that loaded in Nigeria last week has diverted to Asia from its initial Atlantic-bound course after spot prices surged. The BW Brussels LNG tanker loaded a cargo from Bonny LNG in Nigeria on February 27 and was moving west before turning to head south on March 3, data from Kpler showed.
“BW Brussels appears to have changed course from an initial signal toward France and is now heading toward Asia via the Cape of Good Hope,” Reuters reported, quoting a principal insight analyst at Kpler, Go Katayama.
“This likely reflects the widening Atlantic–Pacific arbitrage, with stronger Asian pricing making diversions of destination-flexible Atlantic cargoes more attractive,” Katayama said, noting that more cargoes could follow if the price spread persists.
Qatar is one of the world’s largest LNG exporters, and Asian buyers account for more than 80 per cent of its shipments, according to Kpler data.
The disruption to production there has tightened supply and triggered intense competition between the Atlantic and Pacific basins for available cargoes.
For Nigeria, the shift underscores the role of global price signals in determining cargo destinations in the highly flexible LNG market.
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With buyers in both Asia and Europe set to remain strong bidders for LNG over the near to medium term, analysts say further increases in U.S. sales to both regions can be expected.
Relatively short transit times to the likes of China and Japan compared to cargoes shipped from the United States mean that Australia retains a cost advantage to Asian buyers, as well as more extensive relations with regional buyers.
However, Australian LNG sellers have already committed close to all their projected supplies to contracted buyers, and so may have limited scope to redirect any shipments to the spot market where potential buyers are prepared to pay up for deliveries.
“That may leave openings for other exporters, including Russia, Malaysia, and Nigeria, which have already established global LNG trade routes and look well placed to offer further competition to their larger exporting peers going forward”, the report noted.
