Page 11 - GLNG Week 22

GLNG COMMENTARY GLNG

Asian LNG prices slump once more

Spot market prices are struggling to gain traction in the face of diminished global demand

and increasing supply

PERFORMANCE THE global oversupply of LNG and the destruc- production volume in line with the market
tion of Asian demand owing to the coronavirus slowdown.
WHAT: (COVID-19) pandemic have sent spot prices Malaysia’s exports of LNG are expected to
Spot cargoes for July spiralling for a second week. drop to 1.5-1.64mn tonnes in May, the newswire
delivery into East Asia fell Spot cargoes for July delivery into East Asia quoted unnamed industry sources as saying last
to $1.85 per mmBtu. fell to $1.85 per mmBtu ($52.39 per 1,000 week. This would represent a nearly two-year
cubic metres), Reuters reported on June 1. The low in terms of monthly export volumes, down
WHY: newswire pointed to the number of cargoes on from the 1.92mn tonnes the country exported
Warmer winter weather, the market this week, coupled with depressed in April.
global oversupply and industrial demand for gas around the world, as “The current measures in place are expected
finally the pandemic have behind the $0.07 per mmBtu ($1.98 per 1,000 to continue for the near future, as industries and
wreaked havoc on prices. cubic metre) decline. businesses instil new health and safety regula-
The weakening of LNG prices is a function tions and stricter operations brought about by
WHAT NEXT: of more than just the pandemic, however, with the global pandemic,” Reuters quoted the com-
Demand may not bounce warmer than anticipated northern hemisphere pany as saying in an email.
back to pre-COVID-19 winter temperatures in Europe and Asia exacer- Petronas added that it would continue to
levels until 2022. bating the global supply glut. meet its ongoing contracts as planned and that
The International Gas Union (IGU) noted in these “will not be affected by any changes in the
April that 2019 had been “another record year gas production output”.
of low prices”, which it attributed to increasing The news comes after Petronas announced
gas production, the addition on new liquefaction last month that it would cut its 2020 capital
capacity and limited demand from Asia. expenditure budget by 21% from an initial esti-
Even as Asia’s economies come back online mate of MYR50bn ($11.46bn) and its operating
after prolonged periods of lockdown, there is no expenditure by 12% from 2019’s MYR20.2bn
clear sign that this will translate into a resurgent ($4.64bn). The spending cuts were revealed at
demand for the fuel. Spot prices tumbled below the same time the company reported a 68% year-
$4 per mmBtu ($113.28 per 1,000 cubic metres) on-year collapse in its first-quarter net profit to
in January, marking a 10-year low for the fuel as MYR4.5bn ($1.03bn).
capacity that had received final investment deci- With the international gas market tanking,
sions (FIDs) when energy prices were higher the region’s largest gas exporter – Australia – has
came on stream. begun turning its attention to ways it can prop up
domestic producers.
Production optimisation
Malaysia’s state-owned Petronas has said it is Domestic focus
“optimising” its LNG production in response to Australian Energy Minister Angus Taylor said
weaker prices and demand. last week that it was essential for the country to
The company told Reuters this week that lean on gas-fired power generation as it transi-
challenges relating to the ongoing COVID- tions to a greener economy.
19 pandemic meant that it needed to optimise Taylor’s comments came following an update

Week 22 05•June•2020 www. NEWSBASE .com P11