Speculation about whether greater numbers of LNG spot cargoes will come to US terminals this summer was also the subject of a recent report from Barclays Capital Research.
The range of estimates for US LNG imports in 2009 is “unusually wide,” said the report. It noted that higher prices in Europe may attract all spot LNG or, on the other hand, a paucity of storage capacity elsewhere in the world “will push most of the global oversupply into the US despite low prices.”
“Both arguments have merit,” it said, but neither accurately considers current LNG markets in their entirety.
Outside the US, storage capacity is limited. The size of liquefaction capacity additions coming online over the next 12-15 months and a “sharp contraction in [LNG] demand,” the rest of the world is unlikely to be able to absorb all the excess.
There are, however, pockets of consumption strength, said Barclays, and the market might be underestimating Europe’s ability to take more gas. That could be the case because of Europe’s “low inventories, growing gas-fired power generation and expanding regasification capacity.”
Also, the LNG spot market is at a “fledgling stage, with limited history to suggest how these factors may interact.” This year, with an imminent global oversupply and more market participants “looking to arbitrage regional natural gas prices, the LNG industry is about to test just how global the gas market has become.”
Barclays does believe US LNG imports will grow in 2009, just not as rapidly as “liquefaction additions and economic trends in Asia and Europe alone would suggest.”
