A glut of tankers are reportedly floating off the Spanish coast as a result of the trading strategy
Several ships loaded with liquefied natural gas (LNG) that have been circling off the coast of Spain are likely to stay there until late November, as they wait for European gas prices to go up, Reuters reported on Wednesday, citing industry sources.
An LNG tanker traffic jam has been building off the Spanish coast for weeks with vessels waiting to unload their cargo. Spain boasts the largest LNG storage facilities in the European Union.
The glut of LNG off the coast could be part of a trading strategy by suppliers, as ships are waiting until prices increase to unload, industry sources told Reuters.
Natural gas prices are at their lowest level in Europe since June, having dropped 28% in a week, due in part to above-normal temperatures and high inventory levels, as the EU’s gas storage is now nearly 95% full, according to Rystad Energy.
“If one single idling vessel discharges its cargo, the price will immediately collapse by affecting the other cargoes in the queue and this domino effect is so painful in terms of opportunity cost,” one of the sources told Reuters.
Just by waiting to deliver in December rather than November, the difference in profit could be in the order of tens of millions of dollars per shipment, Michelle Wiese Bockmann from the shipping journal Lloyd’s List told the BBC.
The backlog of ships has mainly been attributed to a lack of LNG storage capacity in Europe. EU countries went on an LNG-buying spree over the summer to fill up their reserves ahead of winter in view of reduced supplies from Russia. But, as the bloc has long relied on pipeline gas, the continent’s regasification and storage capacities cannot cope, Reuters explained.
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