The “Spark30S Atlantic”, a futures contract for the cost of shipping gas from the US Gulf Coast to Northwest Europe, went negative for the first time since its 2019 inception this week, raising eyebrows in the Shipping industry. The spot assessment plummeted from a high of USD 273,000 per day in December 2021 to – USD 7600/day yesterday.

As the power crisis rumbled on in Europe, several factors, including a new gas pipeline from Russia to China, mild winter temperatures, and Chinese New Year reduced demand for LNG in Asia. Data from VesselsValue also shows a steady shift in the balance of ships from the Pacific to the Atlantic over the last seven months, causing an oversupply in the latter and precipitating falls in freight rates for all major LNG shipping routes.

The phenomenon of over sixty ships bound for Asia abruptly turning around and diverting course for Europe was much publicised. But VesselsValue shows that most of those ships arrived last month, leading to a spike in seaborne LNG imports into Northwest Europe of over 14 million cbm, as shown below. Using layers of advanced code to predict destinations of ships currently at sea, VesselsValue shows that this number is likely to fall around 10 million cbm this month. This comes even as the price of natural gas in Europe remains elevated, with TTF futures above USD 25/mmbtu at this morning’s open, and cost of sourcing it at Henry Hub in the US sliding to only USD 4.18/mmbtu at yesterday’s close.

With a wide margin on the trade and effectively “free” shipping, the incentive for gas traders is clear, suggesting there should be ample demand for ships. Meanwhile on the supply side, VesselsValue’s position list for the Spark30S Atlantic designated loading terminal, Sabine Pass, shows some 67 ships currently able to make loading dates in the next 15 days. When this list of 67 ships starts to deplete, the stars should align for the beleaguered contract.
Source: VesselsValue