Global gas market dynamics: three key themes

Has the LNG market already witnessed the bottom?

Having weathered a significant oversupply, many are asking if this summer marked the bottom of the LNG commodity cycle.

We think not. The market still isn’t fully through the five-year supply wave of Australian, Russian and US projects, prompting the worst oversupply since the 2009 downturn.

In the US, as many as six new trains are expected to become commercially operational this winter, putting further pressure on next summer’s balance. In Europe, large storage injections have created an inventory overhang that looks increasingly likely to go into 2020. And Asia, traditionally the engine for global LNG demand growth, faces headwinds in all three of its largest LNG markets – Japan, South Korea and China.

We expect the market to reach a bottom in summer 2020 – followed by a moderate recovery through the latter part of 2021. And from the current position of low prices, there looks to be a number of price upside risks starting to emerge.

So how will the global LNG market balance over the next two years? And what are the implications for prices? Read our LNG short-term trade and price outlook to find out more.

China accounts for two thirds of Asia's gas demand growth between 2018 and 2040

China is the world’s largest energy consumer, and already Asia’s largest gas consumer, but gas plays a relatively small role in its energy mix – below 8% in 2018. However, as part of its energy transition the government is targeting gas consumption to reach 8-10% of the mix by 2020, and 15% by 2030.

If these targets are met, given China’s growth in energy consumption, Chinese gas demand would more than triple.

Meanwhile, a reduction in indigenous production means we see greater headroom for LNG demand in our latest outlook. By the early 2030s Chinese LNG demand will exceed 100 mmtpa and reach 127 mmtpa by 2040 – some 15 mmtpa higher than our previous view.

Visit the store to buy our latest global gas markets long-term outlook.

Russia remains the biggest net exporter of gas to 2040

Russia will retain its position as the biggest net exporter of gas as its export infrastructure expands, particularly due to new LNG projects. The US will overtake Qatar in the mid-2020s to become the second largest gas exporter globally.

Much of the global gas export growth will be attributed to LNG, which is expected to overtake global piped exports as early as mid-2020s.

We forecast multiple new LNG developments in the Arctic, as well as on Sakhalin and the Baltic sea. This will help increase Russia’s total LNG exports to over 140 bcm by 2040.

Visit the store for more of our view on global gas supply.