Global LNG supply will remain tight through this year and into the coming winter period despite new production coming onstream due to high seasonal demand in Asia, according to natural resources consultancy Wood Mackenzie.
Speaking on the publication of its LNG short-term trade and price outlook for the second quarter, WoodMac VP global gas and LNG Massimo Di Odoardo said: “LNG supply growth in 2018 slows a little, adding 27 million tonnes (mt) before accelerating again in 2019 to add 41 mt in 2019."
WoodMac forecasts that over the coming winter LNG prices in north Asia will trade again at oil parity, equivalent to US$12 per million British thermal units (MMBtu).
Di Odoardo points to record demand from China in 2017 which absorbed a large part of the additional 33 million tonnes (mt) of LNG supply in 2017
He said that while there will be a market shift in summer 2019, LNG prices will remain relatively sustained.
Di Odoardo says commentators have been debating whether there was enough market space globally, and in Europe to absorb all this LNG and if Russia was better off competing for market share in Europe, resulting in the LNG price collapsing and US LNG production being shut in.
“Wood Mackenzie sees little risk for US LNG to shut down in summer 2019,” the consultants say.
“Europe import dependency continues to increase as indigenous production reduces. And, as more LNG will increase competition in Europe, lower gas prices will spur some additional demand through coal-to-gas switching in the power sector."
WoodMac says the rebalancing of the global LNG market will result in more LNG having to be absorbed in Europe as LNG spot prices fall to around the $6 per MMBtu mark. The Asian LNG market will be sufficiently supplied with Pacific LNG supply, resulting in them trading at parity to European spot price.
