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Wood Mackenzie Take on Global LNG Market in Post-Coronavirus World

Gasoil News - Published on Wed, 20 May 2020

Image Source: LNG Coronavirus COVID-19
Gas looks to have the best growth prospects among fossil fuels, a bridging fuel for the energy transition with its low-carbon intensity on combustion. Oil and gas companies have been poised to spend heavily on new supply to meet demand growth this decade. But the gas market has turned out to be a slow-motion car crash in 2020. Wood Mackenzie Head of Global Gas Market Research Kristy Kramer told Forbes “Asian spot LNG and European TTF prices are both down almost 80% in 15 months and Henry Hub has halved. There’s been a domino effect: the market was oversupplied going into winter 2019/20, the warm winter left storage facilities full and then came coronavirus. This was quickly followed by the collapse in the oil price and the impact of lockdowns on gas demand. Prices at today’s depressed levels are unsustainable.”

Kristy said “Globally, gas demand has been fairly resilient, down 2% versus 6% for oil. The stability reflects some of the big gas-consuming sectors, such as residential heating and power. Chinese demand has still grown through the crisis; cheap gas has encouraged switching from coal in Europe and the US, with Northeast Asia likely to follow. We’re finessing our numbers but reckon LNG demand may be around 15 million tonnes lower in 2020 than we’d expected. Much of that will be concentrated during peak lockdown in Q2.”

Kristy said “We expect around 15 to 20 million tonne, or 5% of global LNG supply, will come off the market this summer, the seasonal demand low. A sizeable chunk of that volume will be US LNG as the selling price is below cash costs for some off-takers. The problem is that new LNG supply is coming into the market through 2020 and into 2021 from projects sanctioned in the middle of the last decade. These volumes arrive when storage in the US and Europe is already near full. There’s a risk that, just like crude oil, gas storage in the US and Europe fills to the brim in the coming months. Markets with limited storage and export capacity, like Canada and the UK, are at risk of severe discounts like WTI experienced in May.”

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Posted By : Yogender Pancholi on Wed, 20 May 2020
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