A month ago, global exports of liquefied natural gas hit an all-time high. They’re about to grow further, however, as winter in the northern hemisphere draws nearer and demand for heating soars. The first signs are already showing: LNG tanker rates are surging, gaining over 50% in the past week.
A week ago, the average daily rate for a 174,000-cu m LNG carrier crossing the Atlantic stood at $39,750, Reuters reported, citing figures from pricing data provider Spark Commodities. This Monday, that daily average had surged to $61,750, before easing a little bit on Tuesday to $61,500. These may rise further as winter arrives and temperatures drop, driving higher demand—especially in Europe.
The European Union’s gas inventories have reached 83.02% of capacity, which is not bad for this time of the year, but the target is 90% before winter sets in and the withdrawals begin. With that target, the EU is going to see more LNG price pain because, unlike Asian importers, it has little alternative to U.S. liquefied gas, unlike China, for instance, which has a big new pipeline to supply gas from Russia.
The Atlantic freight rates reflect this situation quite directly. Pacific LNG rates, meanwhile, stood at an average $42,250 per day on Tuesday, Reuters also said. This was up from $31,250 a week earlier—higher but not as dramatically higher as Atlantic rates. It is not, however, only seasonal demand that drove rates that high.
“Recent delays to discharge of LNG cargoes into Egypt have been one contributory factor, with knock-on impacts for vessel itineraries,” Stephen Gordon, managing director at maritime research provider Clarksons told the publication. Earlier this month, Egypt requested a delay to contracted LNG deliveries due to weaker than previously expected demand. The cargoes, which were planned to arrive in Egypt by the end of December 2025, will now be rescheduled for delivery during the first three months of 2026, Bloomberg reported.
This has disrupted the global schedule, not least because LNG carriers are generally in rather tight supply. Yet seasonal demand is also playing its usual role at this time of the year. “You see various utility companies and traders ramping up inventories ahead of colder months,” one unnamed trader told Reuters.
“There appears to be a short-term squeeze on vessel availability, with few ships able to meet November laycans in the Atlantic, and these tonnage availability limitations could provide continued support in the short term,” Clarksons’ Gordon also told the publication.
Meanwhile, supply is ramping up in the United States, as Venture Global’s second liquefaction plant begins production and Cheniere’s Corpus Christi facility also ramps up. In fact, the new LNG capacity on the U.S. Gulf Coast has given rise to speculation that the global LNG market is about to swing into an oversupply.
France’s Le Monde this week carried a story predicting a glut as soon as 2027 if all new LNG projects approved since President Trump took office get built. “In previous cycles, the influx of projects eventually pushed some to slow down. Right now, it's as if everyone is ready to jump into an already full pool,” the outlet quoted a researcher from Columbia University’s Center on Global Energy Policy as saying.
The U.S. Energy Information Administration earlier this month forecast that LNG capacity in North America could surge by more than 100% between now and 2029, to a total of 20 billion cubic feet daily, from 14 billion cubic feet daily at the moment. Most of this is going to come from the United States, where there are seven new LNG plants currently under construction.
Right now, however, that poll does not seem particularly full, as prices suggest. Certainly, the disruption caused by Egypt’s change of plans for delivery has played some role but the fact that prices regularly jump considerably ahead of winter suggests that supply is around balance, not in excess. Demand is set to grow over the longer term, as well, especially in Asia where economies are growing, unlike in Europe. While the latter deindustrializes fast, thanks to its energy policies, Asian countries are drawing attention as the new growth engines of the global economy—and also drivers of natural gas demand growth.
Interestingly, Latin America is also going to contribute to higher LNG demand in the coming years, not so much due to economic growth reasons but to lack of alternatives, specifically because of the uncertainty of supply from hydropower plants. According to the Oxford Institute for Energy Studies, the region is going to play a lead role in global LNG demand trends over the next decade.
It seems, then, that despite a perception of too much LNG, the reality is rather different. Moreover, once the new capacity—not only from the U.S. but from Qatar as well—comes on stream, it may push prices down, stimulating even stronger demand. LNG tanker freight rates may be in for an extended period of growth until new tankers get built.
By Irina Slav for Oilprice.com
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