The crude oil market is seen as being in dire straits, but liquefied natural gas is much worse, according to experts.
Hanging as a dark cloud over the market for the next several years are large volumes of LNG from committed US export projects that have firm sales contracts but have yet to be sold to end users.
Consultancy FGE says between 25 million and 35 million tonnes of the 65 million tonnes a year of US LNG export capacity under construction has been sold to “middlemen”, traders or portfolio LNG players such as BG Group or Mitsubishi, which still need to sell the gas on.
“Portfolio sellers and traders are not end users: they must find buyers,” FGE founder Fereidun Fesharaki says.
In addition, about one-third of Qatar’s export LNG volumes are unsold…
That means about 70 million tonnes a year of LNG still needs a buyer, which will weigh on the oversupplied Asian market potentially through to the mid-2020s, the consultancy says. Dr Fesharaki describes those holding the contracts as “desperate sellers” that will provide stiff competition for producers seeking customers for new projects…
Asian LNG market to enter deeper glut as demand falters, supplies soar, Reuters, December 3, 2017:
- Demand in Japan, South Korea and China stalls
- Demand from new importers not enough to meet soaring supplies
- Asian spot LNG prices to fall below $5/mmBtu in 2016 – analyst
Asia’s liquefied natural gas (LNG) glut is set to deepen in 2016 as long-planned new production comes to the market just as demand from top buyers Japan and South Korea as well as China wanes.
While analysts say that new consumer demand may offset dwindling use from established buyers, new supplies will outweigh overall orders, resulting in a low gas price outlook for years to come.
“From having been an import basin, Asia will next year be going to have excess supplies and worse so in 2017,” said David Hewitt, co-head of global oil and gas equity research at Credit Suisse.
…Hewitt said he expected Asian LNG spot to fall to “eye-watering low” levels of below $5 per million British thermal units (mmBtu) in early 2016 and to hit a low of $4 during the year.
Because of the emerging glut, Asian spot LNG prices LNG-AS have already plummeted by almost two-thirds since 2014 to around $7.30 per mmBtu…
|WTI Crude Oil|