Credit Suisse slashes Asian LNG price outlook
Credit Suisse has slashed its outlook for average spot LNG prices in Asia next year to USD 6/MMbtu (EUR 18/MWh) amid an overhang of supply it expects will peak in 2020.
“Our global LNG supply-demand modelling shows 2020 as the year of most ‘oversupply’,” the Swiss investment bank’s head of oil and gas research in Australia, Saul Kavonic, told Montel in an emailed statement.
The outlook represents a discount of nearly 20% relative to where the forward market is pricing the region’s benchmark Japan/Korea Marker at USD 7.40/MMbtu.
“The long-known risk of LNG oversupply has belatedly arrived,” Kavonic said, referring to a plethora of new projects that have been coming online around the world, especially in Australia and the United States, since last year.
The company also sees prices averaging USD 6/MMbtu this year, only a little below market expectations. The front-month JKM contract last settled at USD 4.78/MMbtu.
The JKM has risen from lows of just above USD 4.50/t reached in late March, but remains well below half where it stood last October.
“With LNG now competing head on with coal in some markets, and much coal to gas switching capacity in Europe exhausted, something may have to give,” said Kavonic.
The supply glut presented a risk gas prices in Europe and Asia could yet fall to levels that at least temporarily halt US LNG exports, he said. Kavonic put this floor for deliveries into Europe in a range of EUR 10.60-13.60/MWh.
Analysts Energy Aspects suggested the present soft prices may have incentivised Cheniere, the largest US LNG exporter, to bring forward maintenance on its liquefaction facilities to April.
Cheniere has shut three of five liquefaction trains at its Sabine Pass facility in Louisiana for maintenance this month, putting US LNG output on track to temporarily fall by roughly a third to its lowest level since October.
US LNG exports fell by at least 30% in the week through to 10 April, the Energy Information Administration reported last week. It recorded 0.374m tonnes of LNG – equivalent to 498mcm of gas – leaving the US on five tankers.