As we enter the end of our winter season in the Northeast, the mild winter combined with global oversupply fears has caused liquefied natural gas (LNG) prices to plummet and the worst may not be over.
LNG is mostly used in Asia and Europe, where they don’t have access to significant natural gas pipeline infrastructure. It is usually shipped in large cargo ships from oil and gas producing nations to these areas of the world however, due to the growing risk of the coronavirus pandemic, demand for LNG has softened and so have prices.
Spot LNG prices in Asia dropped below $3.00 per British thermal unit earlier this month. If prices drop below $3.00 per thermal unit, there is a risk of production output declines at major plants. Vital Group CEO Russel Hardy said, “it does not make sense to bring U.S. exports to the market.” Two shipments from Cheniere Energy have already been canceled for April.
As the coronavirus causes problems in the markets from oil to stocks, the global price outlook this year for LNG in Asia and Europe could be cut by a third. China is projected to consume less than 5 million tons of LNG compared to an earlier forecast. Storage levels in Europe will be at a record high and will remain above average for the next heating season. These two markets are the big factors for demand by the end of 2020. LNG was seen as a large growth market for producers and exporters in the U.S.; it seems like a lot of forecasts will have to be revised.