7 June 2018
- According to our Implied Spot LNG Supply model, availability of LNG on the physical spot market remains tight. We continue to see increasing supply later in June and July which may put some downward pressure on prices. Trade flow distribution, a.k.a. the “geographical trade spread”, has been on a steady but admittedly weak downtrend. This means that the share of Asian LNG flows Asia have been rising. Historically, this has proved to be a price-negative development.
- Short-term / spot demand in Europe remains firm. This is partially due to the start of the re-stocking cycle where storage remains problematic and partly on the back of unseasonably low renewable output which continues to support the demand for natural gas in key markets. Demand in Europe is expected to drop sharply from the 15th June onwards which, when combined with gradual supply increase, is likely to push the prices down.
- Our assessment of global macroeconomic conditions continues to improve. This comes on the back of supportive short-term lending activity displayed on the chart below. Recent USD strength may have proved detrimental for additional USA supply which partially explains the supply tightness discussed earlier. The other reason for the tightness in the Atlantic is likely to be the negative export arb to EU for LNG originating in the USA.