The Week in Alt Fuels: Shock LNG price rally fades against stronger LSMGO
A sudden supply shock has pushed LNG bunker prices sharply up.
But when adjusted for energy, LSMGO prices still tower over LNG in Rotterdam and Singapore.
IMAGE: LNG tanker at a gas terminal. Getty Images
Iran’s aerial attacks on Qatar’s Ras Laffan LNG facility, alongside strikes on energy infrastructure across the UAE and Saudi Arabia, have rattled the global LNG market.
Ras Laffan produces nearly 20% of global LNG exports and the physical damage to its infrastructure has amplified fears of a prolonged supply disruption, according to ING analysts.
Global LNG bunker price benchmarks have felt the ripple effects.
When adjusted for energy to make it VLSFO-equivalent, Rotterdam’s LNG bunker benchmark has jumped by more than $200/mt since Monday, driven largely by a near 30% spike in the front-month Dutch TTF gas contract.
VLSFO-eq LNG is still at a $130/mt discount to VLSFO-eq LSMGO, which has rallied $100/mt higher in the past week.
Dutch bunker supplier Titan projects that LNG will regain its cost advantage to conventional fuels for dual-fuel vessels in the coming months.
Tight condensate supply from the South Pars gas field and limited flexibility in global refining capacity are keeping LSMGO prices elevated in Europe. Additional bunker demand from vessels rerouting around the Cape of Good Hope has further tightened availability, supporting higher prices, Titan said.
At the same time, high gas prices have curbed industrial demand and capped a sharp upside in LNG.
“Global refining margins are exploding. While US LNG exports are bridging the gas gap in Europe, MGO cannot be replaced as easily because global refining capacity is already overstretched,” it argued.
LNG bunker price gains in Singapore have also been eclipsed by rallying LSMGO prices.
Singapore’s VLSFO-eq LNG bunker price has risen by over $150/mt since Monday as the NYMEX Japan Korea Marker (JKM) climbed by around 25% over the same period.
LNG's discount to LSMGO has narrowed by $200/mt this week, but remains at a massive $700/mt discount on a VLSFO-equivalent basis in Singapore.
Singapore’s LSMGO price has edged slightly lower this week, but remains steep and supported by tight supply, firm demand and elevated gasoil cargo prices.
Some bunker suppliers in Singapore are charging premiums to capitalise on the situation. Supply disruptions and uncertain bunker supply in Fujairah has also pushed LSMGO demand towards alternative ports like Singapore, a source said.
Concerns over securing future gasoil import cargoes to Singapore have added further upward pressure, the source added.
In other news this week, the Mumbai Port Authority has invited proposals from companies to supply methanol for bunkering in the Port of Mumbai. Respondents are required to propose methanol with a emission intensity cap of 90 gCO2e/MJ on a well-to-wake basis. They must also provide details on the methanol's composition, certification pathway, offtake arrangements and total annual production capacity.
Japan’s Sumitomo, Kawasaki Kisen Kaisha (K Line) and NYK Bulkship have agreed to outline the technical specifications and cost estimates for a newbuild ammonia bunker vessel as part of an ammonia bunkering project undertaken by the Maritime and Port Authority of Singapore’s (MPA)
The European Commission should include non-EU ports up to 600 nautical miles from any EU port within the scope of the EU Emissions Trading System (ETS) to reduce the risk of “evasive” port calls, non-profit Transport & Environment (T&E) said.
Australian energy firm Woodside Energy has pushed back its blue ammonia production timeline to after 2026, without providing a fixed timeline. The company attributed the delay to issues with third-party suppliers. Part of the blue ammonia from the facility was intended for bunkering.
By Konica Bhatt and Tuhin Roy
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