Energy market volatility driven by the conflict in Iran and the closure of the Strait of Hormuz has affected the LNG charter market over the past week. Initially, the Spark 30s charter rates assessment spiked from around $40,000/day pre-crisis to nearly $300,000/day on March 9 as Asian buyers scrambled to attract Atlantic Basin LNG cargoes to replace those lost due to the closure of the Strait of Hormuz. The larger share of cargos heading to Asia has tightened the vessel market due to the longer voyage time from the Atlantic Basin to Asia, compared with Europe. But the spike in rates was followed by a record-breaking downward move in rates of nearly $60,000/day from March 6th to March 8th, as Qatar indicated it was willing to make some of its extensive, and now underutilised, LNG vessel fleet available on the spot charter market.
The supply shut-in will change LNG flow dynamics across the rest of the year. The initial surge in Asian demand, as buyers replace lost Qatari cargoes, is likely to give way to relatively stronger European demand as summer storage injections begin and high gas prices trigger demand destruction in price-sensitive Asian markets.
For more on our fundamental and shipping outlook, or LNG portfolio valuation, contact David Duncan (Director, Gas & LNG) at david.duncan@timera-energy.com.
