High Freight Costs Push More U.S. LNG Toward Europe

High freight rates have effectively shut the Atlantic-to-Pacific arbitrage for the remainder of the year, prompting a reallocation of U.S. spot LNG cargoes toward European markets where shipping costs are substantially lower. Traders and vessel-trackers show that Europe is drawing more prompt supplies from the U.S. Gulf Coast, a shift that contrasts with earlier in the year when Asian buyers won a larger share of U.S. exports. This rerouting comes amid wider disruptions to global flows: constrained LNG shipments from the Middle East over the past seven months have pushed gas prices higher in both Asia and Europe and intensified competition for cargoes that avoid transits through the Strait of Hormuz. With Atlantic-Pacific freight economics unfavorable, sellers are opting to send more cargoes across the Atlantic to Europe despite higher overall shipping expenses. The shift is already visible in cargo tallies. Bloomberg’s vessel-tracking compilation indicates that European deliveries over the past month were only about 4% below year-ago levels, a notable improvement from a roughly 30% annual drop reported in early August. That relative recovery provides additional volumes ahead of the winter season but comes at a cost because the underlying freight environment remains elevated. European gas storage sits below normal seasonal levels heading into winter. Data from Gas Infrastructure Europe showed EU storage roughly 70% full as of September 27, below the five-year average of 86%. Several large economies, including Germany, have even lower fill rates — Germany’s storages were about 57% full — reinforcing concern among market participants about supply security if temperatures turn colder than recent winters.