13 February 2019
- We have held the view that the LNG market has been well supplied for months. Back in December we wrote: “Our current assessment of spot LNG supply continues to suggest abundant supply.” We remain of this view. Another reason for the LNG market to remain under pressure is the unfavorable Geographical Flow Spread which points towards a well (too well) supplied Atlantic region.
- Short-term / spot demand for LNG has declined in the last 4 weeks. This is valid for both Europe and Asia which is an important factor behind the on-going market weakness. The gas storage cycle in Europe is complete and the bullish signal from the recharging phase which propagated to the LNG market between April and September faded in early Q4. Both spot and forward demand remain weak. There is validity in the argument that the spring re-charging phase will support prices but we expect the strength of this impact to be significantly weaker than last year.
- As it stands today, our assessment of the global macroeconomic conditions remains bearish. Short-term lending activity has improved only marginally which in our opinion is a powerful drag to prices. Our main concern remains the outright bearish Energy Intensity of key LNG consuming economies. The Global Energy Intensity improved in early January but the conditions reversed quickly.