Liquefied natural gas (LNG) storage unit.
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RBC Capital Markets said the largest influx of liquefied natural gas (LNG) supplies coming online will transform global markets and have far-reaching and lasting impacts.
“The largest wave of new LNG supplies ever will reshape global markets in the coming years,” the paper’s analysts said. “Given increased collaboration, this will have a broader impact than previous growth.” The investment bank wrote in a memo:
Analysts such as RBC’s Anand Dhanani say the supply injection will likely leave the market in an extended period of oversupply by the end of 2026, which could last into 2030 and push prices below double digits. I expect there will be.
Futures on the Dutch Title Transfer Facility (TTF) hub, the European benchmark for natural gas trading, were trading at $12.78 per mmbtu on the New York Mercantile Exchange on Wednesday.
Throughout the year, analysts have increasingly warned that slow demand growth and a surging wave of export capacity could lead to a significant oversupply in the market. As flows of planned infrastructure continue to flood the market, it is unclear whether demand will increase to absorb each wave.
Masanori Odaka, senior analyst at Rystad Energy, said oversupply and weak prices were underscoring bearish sentiment in the LNG sector. Suppliers are now more likely to prioritize LNG for transportation use over arbitrage opportunities, i.e. profit margins.
Commodity arbitrage involves buying and selling products between different markets simultaneously or sequentially in order to profit from price differences.
Global LNG trade has doubled in the past decade, rising from about 240 tonnes in 2014 to more than 400 tonnes last year, largely due to disruptions to Russian pipeline gas to Europe, according to RBC Capital. Ta. Some saw geopolitical risks as market opportunities.
The investment bank predicted that global liquefaction capacity, or the total amount of LNG that can be produced annually, will increase by about 50% by the end of 2010. The US and Qatar will maintain their positions as the world’s largest suppliers, with their market share expected to be nearly 50% by 2030, RBC added.
Analysts at RBC say many private and state-owned companies plan to increase production capacity “not only to support consumption in Europe, but also to capture expected consumption rate growth, particularly in Asia.” said.
However, demand from the Asia-Pacific region, the largest importer of LNG, is expected to grow by an average of only 5% a year. Approximately 70% of this growth will come from China, India, and South Korea.
On the other hand, despite rising geopolitical tensions, LNG prices have not seen any major fluctuations. Meg O’Neill, managing director and CEO of Woodside Energy, described the market as “surprisingly quiet.”
O’Neill said: “To me, this may be a sign that there are enough sources around the world to cushion temporary supply disruptions from the Middle East. And that’s probably true for both oil and LNG.” he told CNBC. Annual Singapore International Energy Week Conference.
The LNG sector has other pressing challenges that could impact global markets. The Northern Hemisphere winter of 2024-2025 is just around the corner, and existing contracts to supply gas from Russia to Europe via Ukraine are scheduled to expire at the end of 2024, the International Energy Agency noted.
“This could mean that all piped gas transport from Russia to Europe via Ukraine will be stopped,” the IEA said in a recent document. “This will lead to increased LNG imports into Europe next year, resulting in a tightening of the global gas balance.”
