Jan 18 2023
LNG is seeing a competitive boost as a US bunker fuel, as FOB prices have dropped sharply from record highs and spot marine fuel has trended higher.
Shipowners are increasingly evaluating shifting economics and environmental considerations.
Some market participants see the ability to offer a Henry Hub-linked price as a unique advantage for LNG producers in the US, whether for small-scale or large-scale exports or for use as a bunker fuel. LNG bunker prices in Europe also are seeing additional attention. In recent months, an Italian strategy group was heard to have met with market participants trying to get intelligence about LNG bunkering opportunities in the Mediterranean; they were said to be scouting locations around Poland and Turkey.
"The world has been shifting to alternative fuels," said an Atlantic-based LNG trader. "We may see a switch to gas if it keeps coming down."
US SE Coast LNG bunkers were assessed at $15.174/MMBtu Jan. 18, or 115% Henry Hub plus $11.25/MMBtu for volumes of 3,000-5,000 cu m. That was slightly cheaper than the latest bulk 0.5%S marine fuel barge value at 1630 London time, which was $15.249/MMBtu, or $589.25/mt. On an equivalent basis, at the same time, USGC HSFO, with the highest sulfur content of the three fuels, was the least expensive, at $9.616/MMBtu.
The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed at $15.35/MMBtu Jan. 18, down nearly 80% from the record-high $73.35/MMBtu Aug. 26, 2022. LNG supplies have flooded the Atlantic in recent months, amid Europe's efforts to build gas inventories while at the same time reducing its reliance on Russian supplies. Europe entered the winter with gas storage more than 90% full. Relatively mild weather since then has kept gas stocks high.
Meanwhile, spot marine fuel bunkers pricing has generally trended higher for US Gulf Coast ports in 2023, with assessments tracking recent rebounds for crude futures. Additionally, markets are seeing tight supply and logistical challenges related to fog, further propping up values in recent days.
Bulk 0.5%S marine fuel barge value has risen from a Dec. 30 assessment of $567.25/mt, with some sentiment pointing to strong demand from the retail bunkers segment in the US Gulf Coast. On that front, Houston spot 0.5%S bunkers pricing has risen from $580/mt ex-wharf Dec. 30 to its most recent assessment of $618/mt ex-wharf Jan. 17.
The New Orleans market, which competes with Houston for retail bunker stems, has seen retail 0.5%S bunkers value jump from $570/mt to end 2022 to its most recent close at $690/mt ex-wharf—a three-month high.
"No barrels, resupply uncertain," a source said recently of New Orleans' rising prices. "Suppliers are struggling to find resupply barrels."
The situation has seen each of the key USGC ports prop up the other at times on retail values, as ships will generally consider both for refueling operations despite Houston typically carrying a discount to New Orleans.
"There are no avails, or won't be soon," a second source said of Houston. "Product is tight, and resupply has gone up in price considerably."
That retail spread has been inverted at times in January, but more recently tight supply had led to New Orleans seeing its premium widen over Houston.