Global LNG Review – May 2020

Global LNG trade remained stable year on year in May 2020 amid extremely depressed prices

Global LNG net imports* were up 0.46 Mt  in May 2020 compared to April and essentially stable year-on-year (-0.2%) after a 2% Y-o-Y decline in April. These figures contrast with the 11.5% Y-o-Y growth recorded in Q1. Global net imports in May were 13% below January’s which demonstrates a certain level of supply response to low prices but is also largely a seasonal phenomenon. Indeed, in the five year period between 2015 and 2019, the decline in monthly imports from January to April has varied from -20% in 2015 to -6% in 2017.

LNG exports in May 2020 represented approximately 82% of the global liquefaction installed capacity which was only marginally lower than the average capacity utilization at this time of the year over the 5 previous year. They increased by 1% compared to May 2019, with the largest increases in the United States, Nigeria, Algeria and the Russian Federation, reflecting higher capacity utilization in the latter three countries and the launch of a number of new liquefaction trains in 2019 and early 2020 in the United States, where nominal liquefaction capacity increased from 34 to 65 Mtpa between May 2019 and May 2020.


2019: natural gas demand growth slowed but remained strong

In 2019, slower economic growth, Chinese policy changes and a mild winter caused global gas demand growth to slow in a context of oversupply, resulting in a growing LNG surplus and much lower prices. The growth in natural gas demand has slowed down from 5% in 2018 to 2.3% in 2019, returning to the average annual growth rate observed since the start of the century. The main factor behind growth was the switching from coal and oil to natural gas in the power and industry sectors, which was prompted by the competitiveness of natural gas thanks to a growing abundant low-cost supply. This was notably the case in the United States, Europe and some Asian emerging countries. Thus, natural gas has remained the main beneficiary of the energy demand growth, to the detriment of coal in particular, causing its share in the energy mix to expand further.

Quarterly report – Q1 2020 – International natural gas prices

  • The global oil and gas markets are going through an extraordinary period.
  • Crude oil and natural gas prices have fallen significantly since the beginning of 2020 to reach historically low levels at the end of March.
  • Before the spread of the 2019 novel coronavirus disease (COVID-19), spot gas prices were already at seasonal lows due to LNG oversupply, an unseasonably mild winter in the northern hemisphere, economic turmoil (trade war between the United States and China) and renewed confidence in future pipeline gas supply in Europe.
  • China’s gas demand slowed down at the start of the year as the coronavirus outbreak disrupted industrial output. This downturn has gradually compounded the LNG glut on the global spot market and has accentuated the decline in spot gas prices.
  • From mid-March, the decline in spot gas prices has been further accelerated by the impacts of the lockdowns which have ramped up around the world.
  • The impact of the recent slump in oil prices on oil-indexed LNG prices will not be seen until late in the April-June quarter because of the time lag between crude oil and LNG prices under long term contracts.
  • The COVID-19 has already had a devastating impact on global gas demand, which could continue for some time as the pandemic spreads across continents.
  • A number of LNG projects have already faced headwinds amid the coronavirus outbreak and current low oil prices environment. However, as of today, these projects’ delays do not alter Cedigaz’ view for a well-supplied LNG market by 2025/2026.