1. LNG prices enjoying seasonal gains, but joy may be short-lived: Russell

LNG prices enjoying seasonal gains, but joy may be short-lived: Russell

It's around about now that liquefied natural gas (LNG) spot prices usually start rising in Asia ahead of winter demand, and this year looks set to hold to the pattern, although any relief for producers is likely to be short-lived.

By: | Launceston/australia | Updated: October 6, 2016 12:03 PM
Between 2016 and 2020, global LNG capacity is expected to rise by about 50 percent to around 370 million tonnes a year. (Reuters) Between 2016 and 2020, global LNG capacity is expected to rise by about 50 percent to around 370 million tons a year. (Representative image: Reuters)

It’s around about now that liquefied natural gas (LNG) spot prices usually start rising in Asia ahead of winter demand, and this year looks set to hold to the pattern, although any relief for producers is likely to be short-lived.

While the LNG market is heading for structural oversupply next year, and for several years thereafter, there are several short-term factors that have been supporting prices, and should continue to do so for a little while.

Asian spot LNG prices have been trending higher in recent months since hitting $4 per million British thermal units (mmBtu) in April, the lowest since assessments started in 2010.

The price rose to $6.10 per mmBtu in the week ended Sept. 30, up 52.5 percent from the April low, but still less than a third of the all-time peak of $20.50 hit in February 2014.

Even though LNG prices have been in a steep downtrend since the record high more than 2-1/2 years ago, they still exhibit seasonal behaviour, rallying ahead of the northern summer and winter and slipping back during the spring and autumn.

However, the size of these calendar-led rallies have been diminishing in recent years as new LNG supply overwhelms the seasonal demand shifts.

Nine liquefaction trains are expected to start up in 2016, adding 35 million tons of LNG to the market, with the additional capacity coming largely from new plants in Australia and the United States. Australia is poised to become the world’s largest producer of LNG, drawing ahead of Qatar, as it completes the last of eight new projects.

Between 2016 and 2020, global LNG capacity is expected to rise by about 50 percent to around 370 million tonnes a year, and it is this expected run-up in supply that has been such a drag on prices.

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