LNG Market Poised to Head North?

LNG prices are on an up surge with spot prices across Asia surpassing the two-year high recently.

The increase in LNG prices is well supported by the ongoing green drive on the global front. Apart from that, the global stance of ending fossil fuel energy generation along with cold weather is also fanning the commodity.

Image Source: © Kalkine Group 2020

To Know More, Do Read: LNG in a Hive of Activity, Contango as Winter demand Beckons

The global coal fleet is aging fast, and practically no economy has intentions to further revive it thanks to their aim to meet the Parris Accord deadline on reaching the net-zero emission.

During the December 2020 quarter, Asian LNG spot price rose sharply to reach an estimated average price of USD 6.60 per mmBtu, marking over a threefold increase as compared to the levels in mid-2020. Furthermore, the surge in average price remained 88 per cent higher against the September 2020 quarter and 18 per cent against the previous corresponding period (pcp).

LNG Prices Set For a Post Pandemic Rebound

With winter sessions hitting across many regions globally, the LNG demand is anticipated to increase ahead. Apart that that a production squeeze is also unfolding for the commodity, which as per the Department of Industry, Innovation and Science (DIIS) would result in an average increase of USD 4.00 per mmBtu in 2020 to USD 5.70 per mmBtu in 2021 and USD 6.40 per mmBtu in 2022.

Furthermore, the United States Energy Information Department (EIA) projects the Henry Hub spot prices to reach a monthly average of USD 3.10 per MMBtu in January 2021 amid rising space heating demand and the revival of the United States LNG exports.

On the demand counter, the United States natural gas consumption is forecasted to average 79.4 billion cubic feet per day in 2021.

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East Coast Gas Shortage

The rallying prices might be a reason of worry for industrial energy users on the east coast over the supply shortage, which could further propel the price of the commodity ahead, inflicting some price pain for gas-dependent manufactures in the region.

However, on the flip side, the rallying LNG prices is a good news for exporters such as Origin Energy Limited (ASX:ORG), Santos Limited (ASX:STO), Woodside Petroleum Limited (ASX:WPL), and many others who had witnessed a massive plunge in recent past months over the impact of COVID-19 outbreak on the global oil & gas sector.

Furthermore, there had been several supply issues on the domestic counter including production disruptions across various projects such as Gorgon in WA, congestion in the Panama Canal. Apart from that, there is an ongoing uncertainty around the investment in the domestic LNG projects with many FID witnessing deferral, which could further narrow down the domestic supply chain.

Also Read: LNG Export to Stagnate Over the Long-Run Amidst Sizeable Global Trade