Page 7 - GLNG Week 40

GLNG COMMENTARY GLNG
typical year. However, this year part of the decrease could be o set by additional LNG imports.
Beyond the winter, a global surplus of LNG is expected to persist throughout all of 2020, peak- ing in the spring and summer before declining again in the autumn as storage is ramped up. Poten anticipates that in the event of an average winter, Europe will absorb the 7mn tonnes of additional LNG on the global market between September and March. “The combination of a lower than average storage withdrawal and a much higher than normal starting point is fore- cast to leave total European storage at around 60.5 bcm, 64% higher than in an average year,” the report says.
In a scenario where there is an unusually cold winter, meanwhile, Poten expects that an additional 10mn tonnes of global LNG demand would be created, with European storage le at roughly 48 bcm, 18 bcm lower than levels at the start of 2019.
Cycle continues
The cycle is set to continue in 2020, with yet more LNG supplies coming onto the market and storage rising over the course of the year before being somewhat depleted during the winter. Poten warned that even if a colder winter helped to rebalance gas markets, this would not neces- sarily lead to a balanced 2020.
The company forecasts a global LNG sur- plus of 15.4mn tonnes between April 2020 and December 2020. “If Europe, as expected, absorbs the additional LNG hitting world markets, stor- age will once again near the 100 bcm mark in the fall months, leading to a continuation of low prices next year,” the report said.
Several cargoes into Europe are thought to have been diverted to Asia recently. However,
Asia is also well-supplied with LNG currently, so there are few options for where excess LNG can currently go.
Certain factors could have an impact on European LNG demand next year, including the outcome of Russian talks with Ukraine over the renewal of a gas transit deal that is due to expire in January. e two countries failed to reach a new agreement in September but are set for a new round of talks this month. However, supply volumes – both in European storage and glob- ally – are so high that they will likely so en any shocks.
is can be illustrated by the fact that market disruptions in September only caused temporary gas price spikes in Europe. Russia’s Gazprom was forced by a court decision to cut deliveries via the OPAL pipeline roughly in half. At the same time, French utility EDF warned that it had discovered problems with weldings and other components at six of its nuclear reactors.
While these announcements were antici- pated to lead to increased gas demand, causing futures prices to surge, the disruption turned out to be short-lived. Gazprom has been able to keep sending gas to Europe via other routes, while EDF has said it does not need to shut down its reactors immediately. e utility continues to investigate the issue.
Excess LNG supply is expected to continue to weigh on the market as the global economy slows, making it even harder for future cargoes to nd buyers. Indeed, some buyers with exi- ble long-term contracts may be forced to slow or cut their scheduled deliveries. Meanwhile, the seasonal cycle playing out currently in Europe can be expected to keep repeating, unless some major supply shock occurs. Recent develop- ments, however, make such an event increas- ingly less likely.™
Market disruptions in September only caused temporary gas price spikes in Europe.
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