With Over 30 LNG Tankers Waiting Off The Coast Of Europe, US Gas Transporters Could Benefit From Contango

More than 30 natural gas tankers carrying liquified natural gas (LNG) are idling, reported the Wall Street Journal, and slowing their routes off Europe’s coast, waiting for the price of fuel to rise.

As Dutch TTF December Gas Futures stabilized to 113.50 euros from a peak in August, natural gas tankers are incentivized to wait for colder weather to set in.

Why It Matters: Each LNG tanker has enough natural gas to heat a million homes per month, worth roughly $2 billion, according to Market Insider.

Until the Russia-Ukraine War, Europe relied on Russia for roughly 39.2% of its natural gas supply and is now facing its biggest energy crisis since the 1970s, the Wall Street Journal reported.

Russia began using its energy exports as a geopolitical tool, and indefinitely shut down natural gas flows to Europe in September through its Nord Stream pipeline. Besides looking for higher market prices, LNG tankers are unable to offload their haul because Europe does not have enough regasification terminals for the gas.

Although Europe has plentiful gas storage capacity, the Wall Street Journal reported that it is not enough and Europe has been reliant on a steady stream of Russian gas. Now tankers are acting as storage units for natural gas.

This has led to a contango situation, where traders realize they will earn more profits if they hold on to the commodity and sell it at a later date for higher prices.

Also Read: Damaged Nord Stream 1 Pipeline Operator Says Initial Data Suggest Craters At Pipeline Location

The Last Word: As Europe looks to new suppliers for gas and oil, U.S. gas producers such as Coterra Energy Inc CTRA, Cheniere Energy, Inc. LNG, and Energy Transfer LP Unit ET that process and transport gas.

If Europe and the U.S. have a colder-than-average winter, the volatility in natural gas prices will allow producers and traders to earn higher profits.

Photo: Wojciech Wrzesien via Shutterstock