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Market News | LNG Ships Are Being Built Faster Than New Shipments of the Fuel Are Coming to Market, Lowering Freight Rates and Protecting Consumers from Higher Energy Prices — Bloomberg
Ships carrying liquefied natural gas are being built faster than new supplies are coming to market, helping to reduce shipping costs and protect consumers from higher energy prices this winter since at least 2018, according to Fearnleys A/. Shipping costs typically rise ahead of the heating season. Instead, they have been falling since August, and changes in global trade patterns have also been a factor, with LNG tankers increasingly stopping in the Atlantic or Pacific to avoid Houthi attacks in the Red Sea. That means the glut of tankers reflects a temporary imbalance in the market, but is good news for consumers. In Europe, gas prices have reached their highest levels this year even before the heating season begins, partly because of geopolitical conflicts in Ukraine, Russia and the Middle East. Europe and Asia are competing for the world’s limited LNG supplies, with regions using the fuel as a bridge from dirtier fossil fuels to renewables. To meet that demand, new ships are entering the market at an increasing rate. LNG supplies are expected to rise further by the end of 2010, spurring more orders for new tankers, according to ship-tracking data compiled by Bloomberg. Meanwhile, the Golden Pass LNG export project in Texas, co-owned by QatarEnergy, has started up. LNG and Exxon Mobil Corp. have been delayed until at least the end of 2025 because of disagreements with contractors. The company plans to expand production and begin LNG production at Corpus Christi this year, but expects to ramp up production by the end of 2026. Mexico’s Sempra Costa Azul project is expected to begin commercial operations in 2026, a year later than originally planned. Venture Global’s Plaquemines LNG project in Louisiana was expected to begin operations this year, but it is still in the ramp-up phase. As a result, spot rates in the Atlantic and Pacific basins fell below $50,000 a day for the first time in five years in the fourth quarter.
Rising gas prices in Europe are also driving up LNG shipments across the Atlantic to the United States. At the same time, Qatari LNG shipments to Europe have fallen, with most volumes heading to Asia, according to ship tracking data.
In the long term, as the export business develops, the surplus is likely to disappear and the freight market will become tighter.