LNG Market | Russell T. Rudy Energy LLC
“Rigzone” reports that spot prices for liquefied natural gas (LNG) have risen by almost 50% since falling to a decade low in April. Prices had been plagued by oversupply, but production outages and unanticipated demand have driven them back up. However, analysts at Bloomberg predict that the market cannot sustain these prices for the long term.
Supply disruptions in distant corners of the world all contributed to the recent spot price rally. Chevron’s Angola LNG facility has been closed for maintenance, but is scheduled to be back on line in September. The company has twice suspended operations at its Gorgon plant in Western Australia since start-up in April.
Stronger than expected demand in China and India, as well as a cold snap in Europe have all contributed to the price spike as well. In the first half of this year, China imported 21% more LNG than in the same period last year, and India’s demand was up 45% for the same period. Overall Asian demand has been up. As a result of competition with European markets, in conjunction with the aforementioned cold snap, UK prices are up 30% since April.
Unfortunately, this might be just a short term phenomenon. Guatam Sudhakar with consulting firm, IHS, agrees with the Bloomberg forecast stating, “This is likely just a short-term uptick in spot prices. In addition to the resolution of these temporary supply outages, there is a lot more capacity coming into the market and ramping up in 2017. Supply growing faster than demand should prevent a strong uptick in prices.”
In fact, Australia Pacific LNG expects to bring a second process train on line later this year at its Curtis Island facility. Chevron is adding a second train at Gorgon as well. Cheniere Energy will temporarily close its production train at Sabine Pass for planned maintenance in September, but should have its second train there up and running prior to that time.
Trevor Sikorski with Energy Aspects Ltd. concludes, “Spot LNG is largely disconnected from oil and, as such, when you get some more trains on and more volumes hitting the water, spot should soften a bit.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/145825/LNGs_Surge_From_DecadeLow_Seen_Fizzling_As_Supply_Ramps_Up?utm .
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