As energy security climbs the agenda for markets worldwide, understanding what really drives shipping flows has become increasingly relevant, according to analysis from LSEG Data & Analytics.
Energy cargoes rarely stick to their original destination. A shipment can change course while still at sea, reacting to shifting market conditions, with flexible spot cargoes especially prone to diversion when arbitrage opportunities open up elsewhere.
This creates a real challenge for commodities and energy professionals: how is a cargo’s destination decided when both prices and physical constraints are moving targets?
LSEG Data & Analytics points to two broad signals worth watching: destination economics, which is how pricing shapes where cargo ends up, and infrastructure constraints, which determine whether a destination can physically take delivery.
On destination economics, professionals commonly lean on netbacks as a shorthand for commercial attractiveness. Rather than a rigid formula, LSEG Data & Analytics describes netbacks as a summary of potential profitability, combining market prices and transport costs into one comparable figure, though results shift depending on the assumptions used.
In LNG markets, netbacks are calculated by subtracting voyage costs from the landed price, with regasification and feedgas costs sometimes excluded depending on approach.
In oil and refined products markets, netbacks compare refined product value against the crude input, often alongside refinery margins.
Infrastructure constraints add a second layer. Utilisation rates show how much of a facility’s capacity is currently in use, flagging available spare capacity. Capacity can be booked out months ahead, or facilities can face unplanned outages, which is why unit-level outage data across more than 700 refineries globally, such as that available via Industrial Info Resources within LSEG Workspace, matters even when netbacks look attractive.
LNG throws up a further wrinkle: utilisation can exceed 100% when terminals temporarily process beyond nameplate capacity, as seen at Belgium’s Zeebrugge facility. Readings above 100% signal tighter conditions rather than a lasting capacity increase, and definitions vary further in the US, where baseload and maximum authorised capacity levels can both apply.
LSEG Data & Analytics cautions that netbacks and utilisation rates can mislead if read in isolation. A high netback doesn’t guarantee a destination has room for more cargo; utilisation itself shifts with operational and regulatory conditions; and short-term movements don’t always signal a broader trend. Read together, these signals offer a more grounded view of how energy trade flows evolve.
For more insights, read the full story here.
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