By Dan Murtaugh

(Bloomberg) — Asia’s going to have to attend slightly longer for the flood of U.S. shale gasoline to achieve its shores.

A world glut of liquefied pure gasoline has discount variations between areas worldwide, main merchants to ship cargoes for shorter distances to avoid wasting on freight prices, Citibank analysts together with Anthony Yuen mentioned in a report dated July 13. That means U.S. LNG might keep within the Western Hemisphere for the close to future, even with final month’s Panama Canal growth that may lower two weeks off journeys from America to Asia.

“The Panama Canal expansion, inaugurated on June 26, was once expected to be a game changer for U.S. LNG exports to Asia,” the analysts wrote within the notice. “But against the backdrop of this major transition in the global LNG market, the prospects for U.S. LNG into Asia via the expanded canal look less promising, at least in the short-term.”

Only 6 p.c of the worldwide LNG tanker fleet might match via the previous Panama Canal. Now all however the largest class can sail by way of the waterway. That can lower as a lot as two weeks off journeys from the Gulf Coast to Japan, lowering freight prices to 84 cents per million British thermal models from $1.20, in keeping with Citigroup.

While which may assist in the long run, presently these financial savings aren’t sufficient to make up for the compression of worldwide gasoline costs. In October 2014, LNG in Singapore was $5 per million British thermal models greater than gasoline within the U.Okay., which was in flip $5 greater than within the U.S. Now all three costs are inside about $2 of one another.

Regional Trade

The value convergence is a results of a worldwide provide glut, as new manufacturing tasks are beginning up in Australia and the U.S. whereas demand shrinks in South Korea and Japan, the world’s largest importer of the gasoline. The narrower differentials are encouraging commerce to stay extra regional, in keeping with Citigroup.

That means the one Pacific market the Panama Canal would possibly open for U.S. shale exporters is the west coast of South America. The first LNG cargo set to transit the expanded canal is a BP-owned tanker carrying shale gasoline from Louisiana to Chile.

“Global natural gas prices are converging as gas supply increases, sharply reducing market power held by some traditional exporters,” the analysts wrote. “After optimizing for shipping costs and factoring in shifting supply-demand balances, particularly as North Asian demand growth slows amid rising Australian supply, LNG trade may remain somewhat regionalized for now, even with the opening of the Panama Canal.”

© 2016 Bloomberg L.P