LNG price continues to fall amid oversupply from producers
The participants of LNG market are anxious about the continuous fall in the industry amid oil price recovery. The leading investors, traders, and executives in the LNG industry are expected to meet in Perth, Australia. Liquefied natural gas prices continue its downhill slide despite a 50% surge in Brent oil prices.
The crude prices were helped by expenditure reduction, curbing production that hampered the dumping of the commodity into global markets by major producers. But for LNG industry, where project expenses are higher and consume years to construct, production outstrips demand in the market. According to Jeff Brown, FGE's president, the LNG markets are entering the downside of the price cycle rather than climbing the opposite side in the curve.
Spot LNG dropped to $4.029 a million British thermal units on the Singapore Exchange during the week of April 4, registering the lowest fall since September 2014 and stepping into a fifth straight decline. Meanwhile, Brent recorded its first best quarter for four years, after falling to a record low in the past. The oil industry on Friday climbed to $41.94 per barrel, an increase of 13% from 2016 beginning.
While, oil output depends on projects that require short, medium and long-term time period, LNG projects take a longer time to construct gas factories as well as export terminals, Bloomberg quoted Trevor Sikorski, an expert at Energy Aspects. The US producers have frozen their oil production by nearly 600,000 barrels per day since recording a peak in June.
The International Group of Liquefied Natural Gas Importers said that it expects liquefaction capacity in 2016 to reach around 42 million tons per year. Recently, Australia's Chevron Corp produced its first LNG from the Gorgon project and will contribute a major share to the output. In November Sanford C. Bernstein & Co had anticipated LNG deficit to reach 75 million metric tons a year within 2025, requiring an investment of $250 billion through 2020.
On an average, the price of spot LNG arrival in Japan dropped by 10 cents to $6.80 a million British thermal units (mmBtu) during March, marking the poorest level since two years before, Reuters quoted an official data. While the spot LNG prices in Asia declined to $4 a mmBtu in March hurt by overall poor demand in the region.
According to HELLENIC SHIPPING NEWS, Asian LNG for May delivery traded at about $4.20 per million mmBtu, down from $4.30 per mmBtu recorded in the previous week, while LNG for June delivery dropped to $4.00 per mmBtu. Meanwhile, Gorgon LNG project is expected to halt its output for 30 to 60 days due to a mechanical hurdle at its operating site, which prevented a further downward slide in LNG prices.
Japan and South Korea have cut their LNG imports by around 4 million tons in the previous year owing to poor economic condition, increase in demand for alternative fuels and winter. LNG market is hurt by oversupply from producers and poor demand from consumers' world.