The liquefied natural gas market is in for an exciting five years, with major swings between demand and supply excess, BloombergNEF said in its latest LNG outlook.
According to BloombergNEF analysts, this year, for one, will see a faster rise in supply than demand, with LNG available for export exceeding consumption and therefore pressuring prices. Total LNG supply this year will add 33 million tons to a record-breaking 358 million tons annually. Demand, in the meantime, will only rise by 17 million tons—quite a gap with supply.
“This year’s expected excess supply of 16MMtpa will be hard for the market to absorb, unless we get a dose of ‘wild demand’ for either a hotter summer or colder winter in North Asia or Europe. If not, pressure will be on LNG prices,” said the head of commodities at BloombergNEF, Ashish Sethia.
This pressure could prove even greater if the trade deal between the United States and China falls through, which looks like it’s about to happen after President Trump hiked tariffs on US$200 billion worth of Chinese goods effective today and threatened tariffs on hitherto untaxed goods. U.S. LNG would be a natural target for retaliatory tariffs especially since Beijing is already taxing the commodity at a rate of 10 percent in response to U.S. tariffs.
Going forward, however, prices will begin recovering some time in the early 2020s: from 2022 onwards, BloombergNEF analysts said, demand will start improving substantially as China expands its gas distribution network. Another factor that will drive a return to balance between demand and supply is the growing use of LNG as fuel for maritime vessels, and the emergence of Pakistan and Thailand as important consumers of the fuel.
Supply will also increase as several LNG projects in the U.S., Mozambique, and Canada, as well as Russia, are completed also in the early 2020s. Seven of these—of which three in the U.S. and two in Mozambique—are about to get their final investment decisions this year.
By Irina Slav for Oilprice.com
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