LONDON (Reuters) - Liquefied natural gas (LNG) cargoes are piling up off the shores of Europe as the coronavirus pandemic severely disrupts gas demand, leading to delays in tanker discharges and a rise in the number of vessels used as floating storage, analysts said.
Lockdowns due to the virus have led to a slump in industrial gas consumption worldwide, reducing demand for LNG and causing cargo deferrals, delays and cancellations, initially reflected by a build up of floating cargoes in the Far East and India.
Despite some vessels managing to unload as lockdowns ease, LNG demand in Asia remains subdued with prices at a record low, leaving cargoes unwanted elsewhere heading for Europe and creating a new bottleneck.
A total of 11 LNG tankers are floating near Europe waiting to deliver their cargoes, out of 15 floating LNG vessels globally, Nathalie Leconte, market analyst at data intelligence firm Kpler told Reuters.
“Because of oversupply and low prices in Asia, Europe has been a destination of last resort,” Leconte said.
“But with LNG inventory levels and gas storages high and demand low in Europe, it’s harder to accommodate vessel arrivals, which creates delays.”
She said that four of the vessels are expected to deliver cargoes to France’s Montoir port, three each to Spain and Britain, while one had a unknown destination.
Kpler also noted three tankers floating off India and one in the Far East.
Most of the floating cargoes were loaded in Nigeria, four in Qatar and three vessels are on a long-term charter to Royal-Dutch Shell, Leconte said.
(Graphic: Major LNG suppliers to Europe IMAGE link: here)
Companies use different metrics to identify a cargo as floating storage, taking into account loading dates and the speed of the vessel, among other factors.
ClipperData counts at least eight LNG tankers floating close to Europe and the Mediterranean - four near the Spanish Atlantic Coast, two near Britain and two more near Malta.
“There are a higher number of arrivals (to Europe) than last year as more export projects started production,” said Kaleem Asghar, director of LNG analytics at ClipperData, adding that that, coupled with lower demand and higher inventory levels, was leading to the increase in floating cargoes.
He counted 20 tankers floating globally at the moment, with three off west coast of India, two near Japan and in the Middle East, as well individual cargoes offshore Australia and Singapore, among others.
Natural gas prices in Europe have dropped to an all-time low for some contracts this year.
The front-month gas contract in Britain fell below the U.S. Henry Hub front-month future last week, with the Dutch front-month also trading below the Henry Hub at some point on Thursday, according to price data on Refinitiv Eikon.
Aggregate gas storage in Belgium, the Netherlands, France and Germany is equivalent to around 330 terawatt hours, or around 66% of storage capacity, data on Refinitiv Eikon showed, 20% fuller than a year ago.
In Britain, gas storage is 64% full, compared to 54% a year ago.
Trevor Sikorski, head of natural gas and carbon research at consultancy Energy Aspects said LNG prices were likely to stay low in Europe over the summer as buyers tried to shut out U.S. shipments.
Around 20 U.S. cargoes have already been cancelled by buyers in Europe and Asia for June loading.
Energy Aspects has reduced its forecast for the amount of LNG arriving in Europe this summer by 5 million tonnes as buyers are expected to cancel more U.S. loading cargoes this summer, as well as cargoes from other suppliers.
(Graphic: Aggregated gas storage level in Belgium, Netherlands, France and Germany IMAGE link: here)
Reporting by Ekaterina Kravtsova; editing by Nina Chestney and Kirsten Donovan