INTERNATIONAL MARITIME : Excess supply past its heyday, LNG prices plummeted

LNG natural gas prices have plunged as the world grapples with oversupply after a warmer-than-expected winter.

The world is showing signs of gas surplus

The recent golden age of liquefied natural gas (LNG) has boosted prices and profits as well as a wave of investment in the sector. Projects with a total LNG capacity of up to 150 million tons per year are currently under construction, marking a “record wave of expansion,” investment bank Morgan Stanley said in a recent report.

According to the actual survey, for a market that currently has a capacity of more than 400 million tons/year, this represents "significant supply growth".

“We expect oversupply in the gas market to reach its highest level in decades in the coming years,” Morgan Stanley commodity strategists said.

A warmer-than-normal winter has reduced heating demand and reduced gas demand in major LNG consuming countries. Natural gas prices are currently at 1.83 USD/MMBtu (million British thermal units), down about 22% from the beginning of the year to now.

Sharing with CNBC, Mr. Zhi Xin Chong, head of emerging gas and LNG markets in Asia for S&P Global, said: “Global natural gas prices are trending down due to winter conditions. moderate in Northern Hemisphere regions such as the US, Europe and North Asia.

He added that higher-than-average storage levels have had a “big impact on prices” which have been trending downward since last October.

The US, the world's largest LNG consumer, has just experienced the warmest winter in history. Europe recorded its second warmest winter temperature on record. Similarly, Japan's average temperature this winter was also 1.27 degrees Celsius higher than normal, marking the second warmest winter on record.

On a monthly basis, benchmark natural gas spot prices hit an all-time low in February at $1.72/MMBtu.

Which country benefits when global LNG prices plummet???

According to Mr. Chong, countries in Europe will definitely benefit the most from this development.

After Russia cut supplies, Europe's spending on LNG imports increased by 35%, most of which was purchased on a spot price basis. Therefore, lower prices will help maintain fuel import prices at affordable levels.

Other major beneficiaries include India and Southeast Asia, Morgan Stanley said. Lower LNG prices benefit India and Thailand the most because imported gas makes up 30% to 50% of their energy supplies.

India's gas demand is among the most elastic, meaning consumers will buy more when prices fall. Thailand is one of the top gas consumers per capita among emerging market economies.