LNG Vessels Begin to Reroute Away From Red Sea on Rising Tension

(Bloomberg) -- Liquefied natural gas tankers are diverting from the Red Sea due to violence linked to the Israel-Hamas war, threatening longer journeys and delays of the super-chilled fuel.

At least five ships have changed course since Friday away from waters off the coast of Yemen, an unavoidable waypoint for ships using the Suez Canal that links Europe and Asia, according to ship-tracking data compiled by Bloomberg. It wasn’t immediately clear if all of the ships were diverted due to the tensions. 

Companies that transport natural gas, including BP Plc and Norway’s Equinor ASA, are choosing to avoid the Red Sea after Iran-backed Houthi militants stepped up attacks in support of Hamas. Shipments from Qatar, one of the world’s largest LNG producers and a key supplier to Europe, continue to transit the Red Sea toward the Suez Canal, according to vessel-tracking.  

The diversions are also happening at a time when the world’s other vital ocean-to-ocean waterway for LNG, the Panama Canal, is being severely restricted by drought. That means more US LNG shipments to Asia may need to take longer routes around southern Africa.

European natural gas prices jumped 7% on Monday amid growing fears of disruptions to energy flows, before erasing the gains on Tuesday. Still, North Asia, home to the biggest LNG importers, is well stocked for winter and buyers aren’t rushing to find alternative supplies yet, according to traders.

The Red Sea ship attacks are a serious — though likely temporary — development, according to Fearnleys A/S. “The consequences would be too big for the economy to handle, if goods and commodities cannot flow freely through the region,” the shipbroker said in an emailed note. “Securing a safe corridor would be in most nations’ interest.”

It estimates that an average 6.6% of LNG sailings have used the Suez Canal this year.

Other spot market news:

• Beijing Gas purchased an LNG cargo on a DES basis for Jan. delivery to China in the high-$11/mmbtu range
• Shenzhen Energy purchased an LNG cargo on a DES basis for Dec. delivery to China
• Bangladesh’s state-run Rupantarita Prakritik Gas Co. is seeking one spot LNG cargo for Jan. 17-18 delivery

Buy tenders:

(Updates with comments in the 6th and 7th paragraph, as well as European gas prices and vessel rates.)

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