Europe Grabs US LNG as Freight Rates Block Asian Routes

High freight rates have disrupted US liquefied natural gas (LNG) shipments to Asia, prompting European buyers to increase their purchases of spot LNG cargoes from the United States.

According to OilPrice, the arbitrage between the Atlantic and Pacific oceans is currently closed due to high freight rates, making it economically unviable for US LNG cargoes to be shipped directly to Asia.

Instead, most US spot LNG cargoes are being redirected to Europe, where maritime transportation costs are lower. In recent weeks, Europe has attracted more LNG cargoes than before, with deliveries to the region only 4% lower than a year earlier as of September 27, compared to a decline of 30% at the beginning of August.

The shift in demand is attributed to limited LNG flows from the Middle East over the past seven months, leading to higher gas prices in Asia and Europe. As buyers compete for available volumes, European gas storage facilities are currently filled to about 70%, below the five-year average for this period, which stands at 86%. In Germany, the filling level was approximately 57%.