Summary
The UP World LNG Shipping Index fell 2.63% to 163.68 points, underperforming the S&P 500’s 1.95% decline. Despite the market weakness, spot rates surged from $100,000 to $170,000 per day, driven by European winter demand and the LNG price spread between Europe and Asia. Capital Clean Energy Carriers led decliners with a 7.58% loss, while COSCO fell 6.14% and Golar LNG dropped 5.9%, breaking below support after concerns about revenue following its quarterly results.
New Fortress Energy rebounded 15.24% to lead gainers. In comparison, Awilco LNG rose 9.12% after strong quarterly results showed its average TCE rising from $42,600 to $57,800, driven by higher spot rates and improved vessel utilisation. The ratio of declining to rising stocks stood at 14:7 with a median movement of -1.06%. While stock volatility remains elevated amid turbulent US markets, the surge in spot rates may create buying opportunities for companies with ships on the spot market.
UPI & SPX
The UP World LNG Shipping Index, which tracks listed LNG shipping companies, lost 4.42 points (2.63%), closing at 163.68 points, while the S&P 500 index lost 1.95%. The chart below illustrates the performance of both indices with weekly data.
Broader View
Winter in Europe is pushing up demand and, in turn, spot rates, which rose from $100,000 to $130,000 and then to $170,000 per day. The spread between LNG prices in Europe and Asia influences this increase.
At the same time, the situation on the US stock markets is turbulent, and shares in the LNG shipping sector are also volatile. This may create a suitable buying opportunity for companies with ships on the spot market.
The ratio of declining stocks to rising stocks was 14:7, and trading volume remains above average, although lower than in the previous two weeks. The median movement was -1.06%.
Constituents
Capital Clean Energy Carriers (NYSE: CCEC) lost the most, falling 7.58%. The company continues its transformation into an LNG and gas carrier as it continues to sell off its container fleet. CCEC, along with Flex LNG (NYSE: FLNG), may benefit from rising spot rates.
COSCO Shipping Energy Transportation (SS: 600026) fell 6.14%, but continues to move sideways, waiting for the next direction to be determined.
Golar LNG (NYQ: GLNG) fell below its support level with a 5.9% decline. The company has been falling since publishing its quarterly results on November 5. The main reason is concerns about a decrease in revenue.
Chevron (NYSE: CVX) headed south after two promising weeks and is now close to support. The decline was 4.85%.
Shell (NYSE: SHEL) lost 3.29% but remains above its October highs.
Tsakos Energy Navigation (NYSE: TEN) fell 3.18%, but more importantly, the shape of the weekly candle threatens a further decline. However, this is likely just a correction of the ongoing growth trend since April this year.
Excelerate Energy (NYQ: EE) and SM Korea Line Corporation (KRX: 005880) are moving sideways. The former lost 2.8% last week, the latter 2.32%. The sideways trend for KLC is significantly longer and has continued after two attempts at growth at the beginning and middle of last year.
Mitsui O.S.K. Line (TSE: 9104) and “K” Line (TSE: 9107) are also moving at support levels in the sideways trend. While MOL fell 1.8%, “K” Line lost less than 1%.
Among the growing companies, New Fortress Energy (NYQ: NFE, +15.24%) led the way last week, followed by Awilco LNG (OSE: ALNG). ALNG rose 9.12% after releasing its quarterly results. Because ALNG has one of its two ships on the spot market, the rise in spot rates was reflected in its TCE. Its average TCE rose from $42,600 to $57,800. However, this was also influenced by vessel utilisation, which rose from 65% to 95%.
Dynagas LNG Partners (NYSE: DLNG) also rebounded from its support level after its quarterly results, rising 5.9%.
Nakilat (QSE: QGTS) posted modest but potentially significant growth, marking a turning point. The 0.9% growth took place at resistance. Combined with the European winter, this could be an impetus for a new attempt at growth.
Crystal Ball
The late-summer rise was rejected, and UPI returned to its previous range, where it now trades. This area provides firm support. In the short term, we estimate a rise in volatility of UPI´s constituents.
Our outlook remains steadfastly positive in the long term. The burgeoning demand for LNG, bolstered by situational or management-driven actions and the potential for new long-term contracts, paints a promising picture. Investors should watch policy developments, market competition, and upcoming corporate earnings for further direction.
About UPI
Established in 2020, the UP World LNG Shipping Index is a rules-based stock index family designed to measure the performance of publicly traded companies worldwide involved in the maritime transportation of liquefied natural gas (LNG). This unique index covers 21 companies and partnerships worldwide, representing over 65% of the world’s LNG carrier fleet in 2020. The UP Index provides premium services, offering freemium and trial access to charts. With Freemium, users can access the basic UPI vs. S&P 500 chart after completing an email registration. The trial includes full access for fourteen days.
Final Note
This report primarily relies on technical analysis using weekly data.