Natural Gas: LNG to hold up over the months leading into the northern winter – ANZ

Aggressive restocking,in the face of robust demand and supply side issues, has pushed spot LNG prices to record highs; and a growing international LNG market is pushing regional issues into previously isolated markets. While the market could rapidly correct if these conditions ease, economists at ANZ Bank think the likelihood is low. In fact, the sense of urgency is rising among Asian users who face forecasts of warmer than normal temperatures. Asian LNG spot prices are therefore likely to hold up over the months leading into the northern winter.

Not enough natural gas

“The medium term outlook for the LNG market is one of oversupply, as a wave of projects are commissioned over the next few years. With Asia’s demand growth likely to remain strong, Europe will be the balancing market. In the short term, tightness there is likely to keep upward pressure on LNG prices.”

“Following strong growth in Q1, we think European gas demand will remain robust. Growth over 2021 is likely to rise to 3%, back to pre-crisis levels. We expect the sharp increase in carbon prices to support gas use in the power sector through the northern summer and industrial gas demand to keep recovering as economic conditions lift.”

“Restocking in Europe and Asia combined with low inventories and supply-side issues should see Asian LNG spot prices hold up over the months leading into the northern winter. “