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Asian LNG prices

slump once more

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

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

P4 www. NEWSBASE .com Week 22 04•June•2020