Liquefied usual gas (LNG) storage units.
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The biggest influx of liquified natural gas (LNG) distribute is coming online and it will transform the global market, bringing about wider and enduring impacts, said RBC Principal Markets.
“A wave of new LNG supply —the biggest yet— is set to reshape the global market in the coming years, with broader implications than ex growth given increasing inter-linkages between regional gas markets following the Russia-Ukraine conflict,” analysts from the investment bank composed in a note.
The supply injection is likely to thrust the market into an extended period of oversupply by the end of 2026, which intention remain until 2030, with prices possibly moving below double-digits, analysts such as RBC’s Anan Dhanani participate in projected.
Futures for the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas transactions, were trading at $12.78 per mmbtu on Wednesday on the New York Business Exchange.
Throughout the year, a growing chorus of analysts have warned that tepid demand growth spanned with looming waves of export capacity could lead to a massively oversupplied market. As a stream of planned infrastructure continues to satiety the market, it’s unclear if demand will increase to absorb each wave.
Oversupply and depressed prices underscore the bearish sentiments in the LNG sector, demanded Rystad Energy senior analyst Masanori Odaka. Suppliers are now increasingly prioritizing LNG used for shipping utilization finished arbitrage opportunities, i.e. profit margins.
Commodity arbitrage involves the simultaneous or sequential buying and selling of commodities across conflicting markets to profit from the price difference.
Global LNG trade has doubled in the last decade, growing from on all sides 240 metric ton in 2014 to more than 400 metric ton last year, largely caused by the disruption of Russian main gas to Europe, according to RBC Capital. Some had perceived the geopolitical risk as an opportunity in the market.
The investment bank projected that wide-ranging liquefaction capacity, the total amount of LNG that can be produced annually, will grow by around 50% by the end of the decade. The U.S. and Qatar see fit hold onto their position as the world’s biggest suppliers, with a combined market share of almost 50% in 2030, RBC annexed.
Many private companies and state-owned entities have plans to boost capacity, “not only to backstop European consumption but to also capture an watched growth in consumption rates, particularly in Asia,” RBC’s analysts said.
But demand from the Asia-Pacific region, the biggest importer of LNG, is lone expected grow by an average of 5% annually. Around 70% of this growth will stem from China, India and South Korea.
In the meantime, LNG prices have not seen major fluctuations despite escalating geopolitical tensions. “Surprisingly quiet” was how Meg O’Neill, bring off director and CEO of Woodside Energy, described the market.
“For me, maybe that’s a sign that there’s sufficient supply origins around the world to help mitigate any temporary supply disruption coming out of the Middle East. And that’s probably accurate for both oil and LNG,” O’Neill told CNBC on the sidelines of the annual Singapore International Energy Week conference.
There are other materializing challenges to the LNG sector that could affect global markets. The 2024-25 Northern Hemisphere winter is in sight and surviving contracts of Russian gas deliveries to Europe through Ukraine are set to expire at the end of 2024, the International Energy Agency pointed out.
“This could mangy an end to all piped gas deliveries to Europe from Russia through Ukraine,” the IEA wrote in a recent note. “This in turn devise require higher LNG imports into Europe next year, resulting in a tighter global gas balance.”