LNG, oil expected to see limited impact from Suez jam
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The traffic jam on the Suez Canal caused by the giant cargo vessel Ever Given running itself aground is expected to have limited impact on the LNG and oil markets.
That’s conditional on the disruption not lasting longer than a couple of days.
While oil prices have gone up by about $US2 per barrel since news of the grounding broke, Wood Mackenzie notes that stocks of both crude oil and petroleum products are high in the Atlantic Basin.
“A few days of delays in crude or product travelling through the Suez Canal to the west (Europe/Americas) should not have a prolonged impact on the Atlantic basin market,” Woodmac vice president Ann-Louise Hittle said.
“After the canal reopens, the crude market will shift focus towards the April 1 OPEC+ meeting to determine production levels for May.”
The same is true for LNG with the consultancy noting that impact would be limited if the disruption is solved soon as only a handful of LNG cargoes were close to the Suez Cannal when it occurred.
It noted that with the incident occurring as the LNG market enters the ‘shoulder season’ when warming weather moderates energy prices, the impact on LNG spot prices is expected to be minimal.
However, a prolonged disruption could tighten current low LNG charter rates due to the additional distance required to bypass the canal.
“Shipping optimisation might be complicated, particularly for ships already within the Mediterranean and Red Sea. Further delays would impact both loading and discharge schedules and disrupt some flows, mostly to the European market,” Woodmac said.
A longer disruption will reduce the availability of naphtha, petrochemical feedstocks and fuel oil to Asia.
“The Sumed pipeline between the Red Sea and the Mediterranean is used to divert Middle East crude oil flows to Europe around the Suez Canal, so we expect minimal impact on such flows,” Hittle noted.
This may be a moot point with the Suez Canal Authority reportedly saying that the Ever Given has been partially refloated and that traffic will resume once the vessel is towed to another position.