17 April 2019
- We have held the view that the LNG market has been well supplied for months. We maintain this view in the medium-term but there is some evidence to suggest that conditions might be changing. Our LNG market selling pressure index is our latest addition to the proprietary systematic fundamental model and demonstrates that the aggressive selling pressure is abating.
- Short-term / spot demand for LNG remains weak. This statement is valid for both Europe and Asia which is an important factor behind the on-going market weakness. 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. Gas storage CU% moved from 40% in March to 43% today. Our proprietary BUYING PRESSURE index is also supporting the above argument.
- Our assessment of the global macroeconomic conditions has cautiously improved. Short-term lending activity remains subdued which is a major drag to prices. However, the LNG energy intensity which was our main concern for months is showing encouraging signs – see chart below. What this means in our view is that key LNG consuming economies have either become more energy intensive (same economic output for higher energy input) or their economic output increased.