Natural gas market continues to tighten, with seasonal price increases in LNG shipping accelerating.

According to Spark Commodities' data tracking liquefied natural gas (LNG) tanker brokerage prices, the cost of leasing LNG tankers is rising at a faster pace than before, given the possibility of increased winter demand and potential supply disruptions in Australia. The spot LNG freight rates in the Pacific Securities region have skyrocketed to over $100,000 per day since mid-January, three weeks earlier than in 2022. Tim Mendelssohn, CEO of Spark, stated that the increase in tanker rates reflects a significant premium in LNG prices. The market structure reflects an increasingly tight supply in the future, which benefits traders who can delay deliveries when the weather gets colder and prices rise. The market is also growing more concerned about potential disruptions in Australia if strikes at the country's three major LNG facilities continue. Without Australian LNG, Asian buyers would have to compete with Europe for supplies from other sources such as the United States, which would increase shipping time and costs. Oystein Kalleklev, CEO of LNG shipping company Flex LNG, stated on Wednesday that despite the possibility of up to 60 ships being idle due to the strikes, lessees may retain these tankers due to uncertainty about the duration of the interruptions. He mentioned that while most traders have longer lease terms for their vessels, some are re-leasing them and repairing them for others. Spark's data shows that November's forward freight rate for PACIFIC SECURITIES LNG reached as high as $277,000 per day, and Atlantic LNG transportation prices reached as high as $286,000 per day. The volume of floating storage (where traders store goods on water) is also higher than normal levels for this time of year. Additionally, the drought affecting the freshwater level of the Panama Canal has increased waiting times. Kalleklev pointed out that the winter market will see a lot of demand, leading to price increases. There won't be much new LNG entering the market in the short term, meaning the market will remain tight.