Quarterly Update on Global LNG Market
For the Quarter Ending March 2021
LNG supplies remained high over the previous quarters in the North American region, as all the six U.S. LNG export terminals were heard operating at their maximum efficiency amid the rising export demand from the Asia-pacific region. However, later in the quarter, US LNG suppliers were heard diverting their cargoes to the European region as it was feasible for the suppliers to sell into the European market instead of Asia due to the favorable shipping cost. Although prices in Europe and Asia remain much higher than in the Americas. Unprecedented freezing weather conditions in the US gulf region surged the local demand of LNG for the heating purposes.
LNG demand in the Asian region remained high during the first half of the quarter amid cold weather conditions in the North-East Asian region. China and Japan together drove the increase by 162.43 Bcf on YoY basis in January 2021. Japan’s JERA procured a total of 3 million metric tonnes between November 2020-February 2021 to meet soaring demand. The supply remained tight due to the unavailability of the required shipping freights. The average price LNG for imports destined to China reached a 14-month high of USD 8.4 per mn Btu in February, up from $7.36 per mn Btu in January.
LNG supplies were balanced to tight in the region as most of the US LNG cargoes exports were diverted towards Asia. In mid-February, the import from the US declined due to the unprecedented extreme weather conditions. However, the demand of LNG for the heating purposes surged as the severe winter season hits the northwest European region. Whereas, due to enormous Asian demand and tight supplies the prices witnessed multi-fold surge throughout the region.
For the Quarter Ending December 2020
During Q4 2020, North-eastern Asia region saw an enormous surge in the LNG demand as the winter season hit the continent causing unexpected shrinkage in regional supplies exacerbated by lack of shipping availability. The sudden demand surge, production issues in Australia and Malaysia-two key exporters to the Asian market and undue delays due to congestion at Panama Canal further added to tight supply. Combination of these factors triggered a sharp spike in the LNG price across Asia which increased almost by five-times since the 2nd quarter, when the pandemic had driven them below USD 2.00 per MMBtu due to COVID-led disruptions. In December, PetroChina and China National Offshore Oil Corp. (CNOOC) organized global bids for procuring LNG volumes on Shanghai Petroleum and Natural Gas Exchange Shanghai as lower-than-average temperatures and picked-up manufacturing activity soared the regional demand. The Japan-Korea Marker (JKM) benchmark jumped impressively to touch USD 6.8/MMBtu in November. In addition, the UK benchmark NBP and TTF in the Netherlands were also trading in the range of USD 5-6/MMBtu range after collapsing below USD 2/MMBtu at times in the month of May. The positive revisions in the global prices going into the winter months suggest that there is still scope for the LNG demand to grow in the coming months. India’s increased focus on switching from coal-to-gas joined by China and other Asian countries is likely to propel the Asian LNG demand in 2021.
North American LNG exporters seemed more confident about upcoming projects due to a sharp surge witnessed in the global prices because of soaring Asian demand. With spot LNG prices in Asia witnessing nearly six years high, US LNG operators showed greater interest in long-term supply deals that could enable developers to build new export plants. U.S. LNG exports set a fresh record in December, averaging around 9.8 billion cubic feet per day. Soaring export demand from the power sectors further driven by investments in the Methanol and fertilizer projects became the key end-use sectors driving the US LNG market during Q4. Rising demand of LNG pushed the Mexican government to announce massive investment in nine energy projects out of a total of 29 infrastructural projects, all focused around Natural Gas as revealed during the quarter-end during the second public-private infrastructure plan. The country’s three projects are being developed in the pacific region in the coming years due to rising import demand for cheap and reliable LNG from North America via the shortest transport route.
Middle East and Africa
Strong increment in demand for North East Asian LNG prompted middle east to remain in the limelight in the global LNG domain. Leading LNG producer, Qatar was heard diverting some of its cargoes from Europe to Asia due to skyrocketing heating demand due to winter chills. During mid-October, around the 210,000 cbm was directed from Qatar to the Suez Canal, scheduled for delivery to a European consumer, was heard turning around to head back east instead. It later took its course to China. Looking at the expanding scope of LNG for supporting the establishment of gas-based economy in India, the Qatar government set up a task force in the year-end to identify investment projects in the country.