LNG short-term trade and price outlook (Q3 2017) Report

Commodity Market Report 30 August 2017

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Report summary

Asian LNG imports increased at a record pace up to June 2017. With abundant supply and Asian LNG prices soft relative to coal, the market for Asian LNG buyers has rarely been better. Elsewhere, Egyptian gas production has taken the wind out of the sales of Middle East demand growth. LNG imports into Europe are increasing and this will need to continue, with all the new LNG supply coming on-stream. Global LNG supply will exceed 290Mt in 2017. The ramp-up of new trains in Australia and USA, plus new feedgas in Trinidad, Oman, Angola and Egypt will support further growth into 2018. We expect LNG over-capacity to exacerbate in 2019 and US offtakers will turn to the European market on a greater scale to place volumes. US utilisation will come under pressure as Russia defends market share.

Executive summary
- LNG supply highlights
- LNG demand highlights
- European gas highlights
- Price outlook/supply-demand balances
- Key market data
Supply-demand balances
- Introduction
- Global LNG fundamentals
  - LNG Supply
    - Global LNG Supply
    - Downside risks around our view:
    - Upsides to our view:
    - LNG imports
      - Pacific
        
        Asia net imports
      - Atlantic
        
        Americas, MENA and European net LNG imports
      - Pacific spot prices (Japan, DES)
        
        Asia LNG supply and demand balance and spot price premium over European price
      - Recap: Asia saw a remarkable recovery in spot LNG prices, reaching a two-year high in winter 2016/17. Buoyed by cold temperatures and nuclear outages in South Korea, Asian spot LNG price was slightly shy of US$10/mmbtu. However, the Asian premium to European gas prices remained similar to last year as French nuclear outages boosted European gas demand. After winter, prices in Asia immediately dropped to the mid 5's territory as heating demand dissipated and were range-bound between US$5-6/mmbtu. Prices could have decreased further if not for increased demand in North Asia. In H1 2017, North Asian LNG imports have increased by 14% year-on-year, mainly driven by South Korea and China. Asian prices have recovered slightly going into summer as a heat wave in China boosted electricity demand.
        
        Japan LNG spot price
        
        European gas fundamentals
        
        Key data
      - Gas demand
      - Gas supply
        
        Gas Prices