5 September 2019
- We remain of the opinion that the global LNG market is well supplied. However, our model has spotted gradual tightening in the short-term. This process started about a month ago but due to weak demand in Q3 the market did not react accordingly. As a note of caution, it is worth mentioning that most of the loss in supply came from the USA. This LNG flow has proved to be fairly volatile on previous occasions. This shift in ST supply has now been confirmed also by our proprietary Selling pressure Index which quantifies the selling interest on the physical and financial LNG market. The implications for price are positive.
- Short-term / spot demand for LNG has remained subdued. This statement was mainly valid for Europe in July-Aug despite the low renewable output at the second half of August and the usual seasonal re-stocking cycle. A sharp drop in the North Stream flow was also a factor which contributed to strong LNG demand back in July. Recent data suggests that the flow from Norway is also sharply down which bodes well for our cautiously positive demand view in September. This is demonstrated by the steady increase in Buying pressure displayed on the chart.
- Short-term macroeconomic conditions continue to suggest negative medium-term demand and therefore price pressure. This is clearly demonstrated by our proprietary Global Macro Index and its relationship with the LNG price. Needless to say, the index is carefully calibrated to take into account the LNG market dynamics. Our metric for short-term credit conditions in key LNG importers paints a more positive picture. We have seen global credit up in recent weeks which usually supports demand.