LNG Winter Outlook

Acting as the global gas market’s swing buyer, Europe has absorbed a significant volume of additional gas through 2019 as supplies have grown and Asian demand growth has slowed. As of August, Europe’s LNG imports have increased 103% year-on-year, or 31.8 bcm. European s torage inventories are currently at 89% capacity, compared to a five-year average of 74% for this time of year. S pot prices have subsequently fallen to multi-year lows (TTF has averaged $3.75/MMBtu through August) . Is the much-predicted global gas glut upon us? In this piece, we review the likelihood of a strong bid emerging from Northeast Asia this winter for spot LNG cargoes. Although low forward and spot prices are likely to increase the volume of “swing demand” in the global gas market into winter, we still expect LNG markets to remain oversupplied. It will therefore depend on either… • Additional weather driven demand beyond ten-year normal conditions • Further price falls to encourage additional fuel switch or supply displacement • Gas supply reductions either through shut-ins (unlikely) or offtakers turning down cargoes (more likely) …to balance the global gas market. The implication for Europe is that barring an extended period of high gas demand weather in either Asia or Europe, the global gas market will require the region to absorb as much as LNG as possible this winter. This will result in continued and sustained pressure on hub prices well into 2020. Following the release of our European Natural Gas Outlook later this week we will be providing JKM forecasts within our future publications.