Raphael Thys
- Traders are stockpiling liquefied natural gas at sea in hopes of profiting from a winter surge in prices.
- Europe's utilities are also turning to offshore LNG storage as onshore facilities max out, per Bloomberg.
- Russia's squeeze on gas flows to Europe has sent natural gas prices soaring this year.
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Energy traders are stockpiling liquefied natural gas at sea, in a rare profit-seeking move built on hopes prices will surge this winter as Russia's energy squeeze on Europe bites.
At the same time, Europe's power utilities have taken to storing LNG on offshore vessels because onshore storage facilities are at maximum capacity, Bloomberg reported Thursday.
As a result, the amount of LNG in floating storage has hit its highest level in two years, at 1.4 million tonnes globally at the start of September, according to Kpler data cited in the report. There are at least 9 vessels storing LNG off the coasts of Europe, Asia and Central America, it said.
Traders are hoarding LNG as they see a potential opportunity to cash in on spikes in European gas prices this winter, per Bloomberg.
European gas prices have soared since the start of the year, notching record highs above 340 euros ($340) as Russia choked off flows to the continent. Leaders there have accused Moscow of "weaponizing energy" in retaliation to Western sanctions imposed over the Ukraine war.
Dutch TTF natural gas futures, the European benchmark, shot up 36% in a single session Monday on the news that Russia's state-energy giant Gazprom had indefinitely halted supply via the key Nord Stream 1 pipeline to Europe. Prices were down 8% at 196 euros at last check Thursday, thanks to hopes for a European plan to cap Russian gas prices.
But with gas supplies in Europe expected to get tighter in the winter months, as demand rises for heating and other uses, there is the prospect of another run higher for prices.
Meanwhile, European utilities are keeping LNG in floating storage offshore as facilities on land have filled up. The strategy reflects the extent of the European energy crisis, which has countries scrambling to stockpile on as much fuel as possible to make up for the absence of Russian gas over the colder months.
It's an unusual move, given LNG is prone to evaporating over time. But Russia's rolling gas cuts have prompted other rare moves to take advantage of Europe's thirst for winter fuel — such as Asian sellers of LNG mixing leftover fuel from Australia and Oman into full shipments to send to Europe.
Meanwhile, Europe is racing to build floating LNG terminals. Onshore LNG regasification facilities — which convert LNG to gas — take longer to install, so the offshore floating terminals are seen as the solution in the crunch.
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