A liquefied pure fuel tanker sails previous a container terminal because it arrives in Yokohama, Japan, Could 21, 2018.
Tomohiro Ohsumi | Bloomberg | Getty Photographs
Pure fuel costs have plunged because the world grapples with an oversupply after a warmer-than-expected winter.
The latest heyday in liquefied pure fuel boosted costs and earnings, spurring a wave of funding within the sector. Over 150 million tonnes each year value of LNG capability is at present below building, marking a “record wave of expansion,” Morgan Stanley stated in a latest notice. For a market that at present stands at over 400 mtpa, this represents a “significant supply growth.”
“We expect gas market oversupply to reach multi-decade highs over the coming years,” Morgan Stanley’s commodity strategists stated.
Natural gas costs at present stand at $1.83 per MMBtu (metric million British thermal unit), down about 22% to date this yr.
A hotter-than-normal winter has dampened demand for heating and consequently fuel in key LNG consuming nations.
Costs of pure fuel year-to-date
What does it imply for various nations?
“Countries in Europe will definitely benefit the most from these low prices,” stated Chong.
Following Russia’s provide curtailment, Europe’s LNG imports expanded to 35% of its whole fuel provide combine, the majority of which is bought on a spot worth foundation. Therefore, the decrease costs are useful in maintaining gas imports inexpensive.
Different key beneficiaries embrace India and Southeast Asia, stated Morgan Stanley. Decrease LNG costs profit India and Thailand essentially the most as imported fuel constitutes 30% to 50% of their power provides. India’s fuel demand is among the many most elastic, that means customers would purchase extra as costs fall. Thailand is without doubt one of the prime fuel customers per capital amongst rising market economies.
Whereas ample LNG storage capability globally underscore bearish fundamentals for costs, Rystad Power’s senior analyst Lu Ming Pang stated demand may decide up as second-tier and rising gamers like China are lured again into the market by low costs.
“All these factors seem to point to a price floor,” stated Chong.
