A correction has been recorded to the charters of liquefied natural gas (LNG) recently amid escalating geopolitical risks.
According to data from commodity tracking platform ICIS, spot rates in the Atlantic were on October 13 at $140,000 per day for a TFDE (tri-fuel diesel electric) LNG carrier.
On October 3, the same steamer totaled $200,000 a day on the spot. In other words, there was a 30% drop in the revenue of LNG carriers in a period of 10 days.
ICIS LNG analyst, Alex Froley, expressed concern over developments in international gas markets. As he told “Naftemporiki”, the conflict in the Middle East is reducing gas production from the region, which could lead to a drop in LNG exports from Egypt.
For example, Israel closed the Tamar gas field. The specific field provides about 70% of Israel’s energy needs for electricity generation, according to US-based Chevron, which controls 25% of Tamar.
According to market analysts, if the field remains closed for a long period, this could lead to a decrease in Israel’s natural gas exports to neighboring countries, such as Egypt, which transports gas to Europe.
The freight market
LNG freight rates have eased from their peaks recorded since late September.
As PerChristian Willoch Fett, global head of LNG at shipping firm Fearnleys, explained to “Naftemporiki”, this correction comes as a result of warm weather conditions over the past month and the first few days of October in the Northern Hemisphere, reducing demand for liquefied natural gas.
Looking to the future, he added that the direction of the freight market will depend on weather conditions.
However, the analyst pointed out that natural gas prices have increased in the last week, as a result of the uncertainty from the developments in Israel and Palestine, but also the forecasts for a slightly colder winter in Northern Europe.
If gas prices remain strong, then it is likely that LNG carrier rates will start to rise again.
