LNG

May 13, 2020

The Research Team reviews the LNG market

 

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13 May 2020

  • Recently, we have seen a trend towards over-supply on the global LNG market due to the drop in demand related to Covid-19. This has been confirmed by our Implied Spot Supply. As discussed in the attached report, we have seen and can expect a continued drop in imports which will lead to oversupply. This is captured by our Implied Forward Supply indicator which looks at the month ahead. Further effects of the drop in imports has been captured by our proprietary Geographical Flow Model, which identifies physical LNG movement between key origin and destination points.
  • With considerably mild weather over much of Europe as of late, in partnership with pandemic-related lockdowns, we have seen European demand for LNG drop. This environment is set to persist, which has been captured by our Implied EU Demand indicator, which shows low demand for approximately the next two weeks. However, our Asian Demand index has shown continual improvements for the past couple of weeks, in conjunction with countries such as China loosening lockdown restrictions. As countries continue to weaken restrictions, we can surely expect demand to improve.
  • The macroeconomic environment appears to be showing some improvement, albeit slowly. In our last note we commented on how credit has been diminishing; this week we have seen a small but important improvement in our Money Markets Liquidity Index. Furthermore, economies around the world are slowly restarting. This has been captured by our Energy Intensity Index, shown by the red bars trending towards 0.

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