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A buyer’s market

A buyer’s market
Over the past year, world LNG prices, shown in $USD / Million British Thermal Units ($/MBtu) have had the trend to lower and equalize across all regions. While prices in the U.S. and Canada have decreased marginally, prices in all other areas of the globe have fallen by 40-50 per cent. Prices in northeast Asia have fallen by the most, where prices averaged $18/MBtu just two years ago. This equalization trend is driven by largely a significant increase in export capacity from countries such as Qatar, Papa New Guinea, Algeria and Australia, which has finally absorbed Japanese demand post-Fukushima. A global surge in natural gas export capacity is making the gas trade a lot more competitive. This is especially true in Europe, where U.S.
LNG threatens to challenge Russia’s long-held customer base. Cheniere Energy is putting the final touches on its Sabine Pass LNG export facility in the Gulf of Mexico, and several more export terminals are under construction and will come online in the years ahead. Sabine Pass LNG export facility is the first of its kind to export LNG from the U.S. coast. These terminals are seeking to export LNG to Asia, as well as to customers in Europe.

The future for LNG at least for the next 5-10 years, looks set to be a buyers’ market.

The global LNG market has been a seller’s market ever since the Fukushima disaster in 2011.

The market, however, went through a big change in 2014. Due to a decrease in demand starting in the summer of 2014, the spot prices of LNG dropped and were priced at roughly $10/mmbtu as of November 2014. As the global oil prices have dropped since June 2014, Asian LNG prices linked to the global oil prices fell accordingly.

Platts JKM LNG (Japan-Korea Market price for LNG) was $20.00/MMBtu in the beginning of 2014 but it dropped to less than $7/MMBtu in the first quarter of 2015. It came down to about $4.4/MMBtu in May 2016 according to the table below.

Spot LNG Prices in 2013-2016 ($/MMBtu)

  Dec. 2013 Sep. 2014 June 2015 Nov. 2015 May 2016
US Henry Hub 4.5 3.8 2.7 2.0 1.9
UK National Balancing Point 10.6 8.2 6.7 6.0 4.2
Platts JKM™ 17.6 12.8 7.5 7.5 4.4

source : Compilation of data

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