Rotterdam LNG Shifts From $2,900 Premium to VLSFO to $87 Discount in 11 Months

LNG bunkers at Rotterdam are now priced at the largest discount to VLSFO since April 2021. Image Credit: Ship & Bunker

A cooling of the global gas markets after the war in Ukraine sent them into a frenzy last year has left LNG delivered as a bunker fuel at Rotterdam at the biggest discount to VLSFO in more than two years.

LNG priced in fuel oil terms at Rotterdam stood at $465/mt on Wednesday, according to Ship & Bunker data, down by 77% from the $2,058/mt seen a year earlier.

That left LNG at an $86.50/mt discount to VLSFO delivered at the Northwest European hub, compared with a $1,261/mt premium a year earlier and the biggest discount since April 2021.

Global gas prices started to jump in late 2021 on concern over potential conflict in Ukraine, and surged after Russia launched its full invasion in February 2022 with traders speculating the Western response would involve sanctions that could block Russian gas exports from reaching European markets.

LNG priced in fuel oil terms at Rotterdam peaked at $3,660/mt in August of last year, standing at a $2,930.75/mt premium to Rotterdam VLSFO on August 30.

But with the European gas market managing to increase imports from elsewhere to meet its heating and power needs last winter, prices have since come down sharply. LNG in fuel oil terms at Rotterdam first dipped to a discount to VLSFO in May, according to Ship & Bunker data, before returning to a small premium from June 19-July 7 and then re-establishing its discount from July 12 to the present.

Shipping firms with dual-fuelled vessels capable of running on both conventional fuels and LNG almost universally switched to using conventional bunkers last year, and those that did not were largely required to for contractual or regulatory reasons.

But this year the LNG bunker market has seen a return as these ships resume taking on gas. Ferry company Balearia announced earlier this month that it had returned to exclusively using LNG in its dual-fuelled vessels, having cut its LNG purchases by 94.7% in 2022.

The trend can be observed in demand data released by the ports that have official data on LNG bunkers.

Rotterdam's LNG bunker sales climbed to 86,088 m3 in the first quarter of this year, up from 58,599 m3 the previous quarter. And Singapore's 17,900 mt of LNG bunker sales in June of this year beat the 16,300 mt sold throughout the whole of 2022.