23 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 and a half 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 at the end of August and early September came from the USA. Supply flow has since recovered. This shift in short-term supply has also been confirmed by our proprietary Selling pressure Index which quantifies the selling interest on the physical and financial LNG market. Last, but not least is our Geographical Flow Spread which maps the flow of LNG across key trading basins. Also here, the short-term prospects for price appear positive.
- Short-term / spot demand for LNG remains subdued. This statement is valid for both Europe and Asia. In Europe demand erosion comes on the back of diminishing incentive to import LNG which is evident on the Forward Demand chart. Asian demand on the other hand appears more related to the structural economic slow in the area. The prospects for Q4 remain positive as we expect demand to re-emerge in Asia at the time when supply is (temporarily) reduced. 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 as published in the previous research note. As suggested earlier, we expect the situation to improve. The main driver appears to be the credit availability as displayed on the chart to the right.