A surge of LNG tankers is very large in Europe in an energy crisis and striking natural gas prices

November 01, 2022: -The U.S. is exporting more LNG to Europe due to Russia’s war in Ukraine, and cuts are making to natural gas supplies ahead of winter. Still, there has been a buildup of LNG vessels remaining to unload at ports, with European infrastructure who are not able to handle the increased LNG shipments.

Sixty LNG tankers have been idling or sailing around northwest Europe, the Mediterranean, and the Iberian Peninsula, according to MarineTraffic. Eight LNG vessels from the U.S. are underway to Spain’s Huelva port. One is anchored at the Suez Canal.

“The wave of LNG tankers has overwhelmed the European regasification facilities to unload the cargoes promptly,” said Andrew Lipow, president of Lipow Oil Associates.

This is postponing the tankers’ return to the Gulf Coast of the United States to pick up the coming load, according to Lipow. As a result, natural gas inventories rise over the market expected.

The underlying infrastructure problem is a lack of European regasification capacity because of a shortage of regasification plants and pipelines connecting countries with regasification facilities. As a result, the amount of LNG in the water floating storage increases and, in turn, drives down the price of natural gas.

“European gas storage continues to increase and now exceeds 93%,” said Jacques Rousseau, managing director of global oil and gas for ClearView Energy Partners LLC.

Rousseau said the growth in floating storage, with vessels wanting to move capacity all over the globe tied up for longer, contributed to an approximate doubling in LNG tanker rates every year.

Energy experts said they are keeping an eye on an EU LNG price cap. The cap was discussed the previous Thursday, even as prices have declined. “The price cap potentially made traders out of the market, which would impact upcoming supply arriving in Europe,” Rousseau said.

European gas prices had soared over 340 euros per megawatt hour in late August, but this week dipped less than $100 for the initial time since Russia cut supplies. Before the war, the price had been as low as 30 euros.

Russia, which supplies a significant portion of natural gas to Europe, cut gas supplies in response to sanctions after the war with Ukraine.