Friday, February 14, 2020

LNG: "Globalized gas prices race towards rock bottom…"

From Platts Commodity Tracker:6 charts to watch this week, February 10:
1. Globalized gas prices race towards rock bottom…

Global gas prices converge

What’s happening? Global gas spot prices have converged again in recent weeks to the downside as the coronavirus outbreak and its impact on Chinese LNG demand adds to already very bearish sentiment across the world. Spot prices in Asia, Europe and the US have converged in an extremely narrow $1.10/MMBtu range as the global gas glut looks set to worsen amid weak demand, high storage stocks and mild winter temperatures. The JKM Asian spot price has fallen to an all-time low of just $2.95/MMBtu.

What’s next? Coronavirus has begun to weigh significantly on Chinese LNG import demand, which has been the main driver of global gas demand growth in recent years, with state-owned CNOOC declaring force majeure on some of its import contracts. With cargoes expected to be diverted to Europe, it seems likely there will be more pressure on northwest European hub prices in the coming weeks. With no improvement in global gas prices expected through 2020, the trend for price convergence looks set to continue.
2. …setting US LNG exports on a bumpy path

US LNG export forecast
What’s happening? The upward trajectory of US LNG exports is expected to stall next year before falling and rising again, leading the market on a roller-coaster ride through the middle of the decade amid uncertainty about new project start-ups, S&P Global Platts Analytics data shows. Weak prices in Asia, lower than expected demand in key markets and geopolitical concerns have been weighing on suppliers and end-users. Add in the coronavirus outbreak and a perfect storm of challenges is festering.

What’s next? Relief may depend on China’s next move. It plans to cut tariffs on imports of US crude and other products February 14, but for now is leaving duties of 25% on US LNG in place. US developers of new liquefaction projects are counting on long-term contracts with Chinese customers to help advance their terminals....