The combination of ample inventories at the end of a mild winter, steady imports of LNG, and weak demand has led to eight consecutive weeks of weekly losses in European benchmark natural gas prices, the longest weekly losing streak in more than six years. Besides, currently, gas inventories are comfortably high for this time of the year. As of May 24, natural gas storage sites in the EU were 66.71% full. The level of gas in storage is the highest for this time of the year in at least a decade.

The price of LNG as bunker fuel showed a significant decline in week 22. In the port of Rotterdam (Netherlands), the price of LNG on May 31 reached 548 USD/MT (minus 83 USD compared to a week earlier). Thus, LNG in Rotterdam is currently priced 116 USD lower than conventional fuel MGO LS (664 USD/MT as of May 31).

In the port of Sines (Portugal), the price of LNG as bunker fuel remained steady at 742 USD/MT, making it 5 USD cheaper than MGO LS (747 USD/MT as of May 31). The availability of cheaper LNG as an alternative bunker fuel is once again capturing the attention of market participants, making it an attractive choice. More information is available in the LNG Bunkering section of www.mabux.com.

During week 22, the MDI index (the ratio of market bunker prices (MABUX MBP Index) and the digital bunker benchmark MABUX (MABUX DBP Index)) maintained an undervaluation of 380 HSFO fuel in all four selected ports. Weekly average of the undercharge rose in Rotterdam, Singapore and Fujairah in the range from 1 to 16 points. In Houston, the MDI remained unchanged at minus $39.

In the VLSFO segment, Singapore remained the only port where overcharge was observed according to the MDI. The overprice average decreased there by 4 points. The remaining three ports were undervalued, with average levels up 7 points in Fujairah and 3 points in Houston, and down 1 point in Rotterdam.

In the MGO LS segment, three ports remain undervalued: Rotterdam, Singapore and Houston. The average weekly undervaluation level rose in Rotterdam (plus 5 points), but decreased in Singapore and Houston: minus 3 and minus 11 points, respectively. Fujairah remained the only overvalued port, where the revaluation level saw another reduction of minus $16.

For more detailed information on the correlation between market prices and the MABUX digital bunker benchmark, please refer to the “Digital Bunker Prices” section at www.mabux.com.

A report published by Climate Analytics and Solutions for Our Climate says that the ‘uptake shipping capacity far exceeds global forecasts of LNG trade as the world transitions away from fossil fuels’ – and consequently many of the LNG carriers now being built could become ‘stranded assets’. The findings of the report were ‘especially relevant’ to South Korea, which dominates the global LNG shipbuilding industry. According to Dongjae Oh, the oil and gas finance program lead at Solutions for Our Climate: ‘The risk is imminent for Korean shipbuilders who are highly reliant on building hundreds of LNG carriers that a net-zero world will not need, and that they may not even be paid for.’ The report says that the current ‘surge’ in orders for LNG carriers has been ‘largely driven by the oil and gas industry’s dash for LNG following conflict in Ukraine’. But it added that: ‘Under growing pressure to decarbonise, governments around the world have announced pledges and adopted policies that would render much of the new LNG vessels useless.’

We expect there are no uptrend drivers in the global market so far. Bunker indices may show a moderate decline in the upcoming week.

By Sergey Ivanov, Director, MABUX