13 March 2019
- We have held the view that the LNG market has been well supplied for months. We maintain this view and the evidence is clearly displayed on the figure below. It shows the sharp increase in SELLING PRESSURE on the LNG physical market in recent months. The index is our latest addition to the proprietary systematic fundamental model. 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. Having said all this, we are registering changes. The market will react accordingly. The question is when.
- Short-term / spot demand for LNG has declined in the last 4 weeks. This is valid for Europe and Asia which is an important factor behind the on-going market weakness where 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. Global macroeconomic index hasn’t been too supportive of prices either.