Strong European demand for liquefied natural gas is expected to cap shipping costs this winter by keeping more cargoes within the Atlantic basin, though a resurgence in buying from Asia could constrain vessel availability and lift freight costs.
Both Atlantic and Pacific freight rates have fallen back to levels seen before the US-Israeli war on Iran, as more newbuild vessels join the global fleet and a greater share of US cargoes have been heading to Europe rather than Asia, shortening voyage distances and boosting ship availability.
Atlantic freight rates assessed for vessels with two-stroke engines capable of carrying 174,000 cubic meters of LNG – the most common type in the market – stood at $25,750 a day on Tuesday, according to pricing agency Spark Commodities.
That compared with multi-year highs of $287,500 a day in early March and $42,750 a day at the end of February, just before the war began.
Pacific rates for the same vessel class were at $39,000 a day on Tuesday, compared with $225,750 a day in early March and $28,250 a day before the conflict started.
That decline stands in contrast with the market for oil tankers, where freight rates for supertankers carrying Middle East crude to Asia have surged to record levels as regional exports rebounded in September, increasing demand for ships to conduct oil transfers in the Gulf of Oman.
“The growing share of Atlantic trade, combined with an increasing pool of prompt vessels, will continue to pressure freight rates,” said independent LNG and shipping analyst Pratiksha Negi.
“I expect Europe to remain the principal destination for marginal US LNG at the start of Q4 2026, given the significant storage deficit this season.”
More newbuild deliveries are also expected to remain a structural drag on freight rates. Around 55 new vessels were delivered in the first seven months of 2026, with another 40 to 45 expected by the end of the year, along with roughly 95 in 2027 and 80 in 2028, Negi added.
“This will create a fair ceiling on freight rates, particularly if LNG demand and ton-mile growth do not keep pace with vessel supply,” she said.
EUROPE DEMAND EMERGES
After the Iran war broke out, Asia began takingmore US cargoes, seeking alternatives to disrupted Gulf supplies. Europe had refrained from aggressively refilling its inventories amid a backwardated market, in which near-term gas costs more than winter prices, offering little incentive to build stockpiles.
Europe’s US imports, however, picked up in August and September, drawing volumes away from Asia, while shortening voyage distances and boosting vessel availability.
US front-month arbitrage to Asia via the Cape of Good Hope has been firmly closed and pointing to Europe, while forward curves show Europe will continue to be the most attractive region for US cargoes throughout the winter, said Spark Commodities analyst Qasim Afghan.
“This is particularly true of Q1 2027 – February and March currently show Europe to be over $3 per million British thermal units more profitable than Asia – the strongest US arb signals to Europe since December 2022,” he said.
Pricing in the fourth quarter of this year is another matter. While still favouring Europe, it is not at sufficient levels to rule out region switching, so further volatility between Asian benchmark JKM and Dutch TTF gas prices could redirect cargoes to Asia, Afghan added.
“These pricing signals indicate continued downward pressure on freight rates throughout winter,” he said. “However, any further JKM-TTF volatility, or sudden logistical tightness in the market, could increase freight rates above current market expectations.”
(Reporting by Emily Chow; Editing by Thomas Derpinghaus)