LNG spot charter rates are climbing higher, with the Spark Atlantic spot freight assessment up ~26% since mid-October. The rally is the second this winter, coming after rates rose to ~$200k/day across September (for reasons we discussed in a recent snapshot).
The initial rally was interrupted by a counter seasonal fall to lows of $130k/day through the first half of October, after a rally in TTF incentivised a partial unwinding of the Oct-Nov float.
The rebound over the past fortnight can be attributed to a combination of factors:
- Floating storage driven by seasonal contango: Mild, windy weather in NW Europe has moderated early winter gas demand and left underground storages near tank top. To balance, the market has reopened a contango on the DA – MA spread, giving vessels incentive to float into later dated premium contracts.
- Panama Canal constraints: El Nino weather pattern has contributed to severe droughts at the Panama Canal, diverting the flow of Asia-destined Atlantic LNG supply to lengthier shipping routes (COGH, Suez) and thus reducing vessel availability.
- Reversion to seasonal pattern: Higher charter rates into peak winter are normal, driven by a seasonal uplift in global supply (end of maintenances) and Asian demand driving an increase in tonne-mileage.
Source: Timera Energy