The global liquefied natural gas (LNG) industry is set to face its first seasonal demand contraction since 2012, Wood Mackenzie said on Tuesday.
According to research director Robert Sims, demand in summer is expected to drop 2.7%, or by 3 million tonnes (Mt) year-on-year. The forecast reflects the effects of lockdown measures and the negative economic outlook on Asian LNG importing countries, Kallanish Energy learns.
“Covid-19 will drive a global contraction in LNG deliveries through summer 2020 compared to the previous year. This will be the first seasonal contraction in eight years,” said Sims.
He added that the coming winter season – late 2020/early 2021 – there could be a “modest” 5 Mt improvement in global demand compared to a year earlier. But “in general, a return to stronger growth is not expected until mid-2021,” the analyst said.
Additionally, pricing dynamics between both seasons are expected to be similar, with the cross-basin spread set by the economics of U.S. LNG. Sims noted that there could be some downside risk to Asian prices this winter if buyers lift some of the deferred volumes from this summer.
Wood Mackenzie estimates that LNG demand in Japan, the world’s No. 1 LNG importer, will fall 3% in the second quarter to 15.8 Mt, compared to Q2 2019. Consumption in India, another engine for LNG demand growth, is poised to plunge 24% y-o-y in Q2. The country imported a record level in Q1, with volumes rising 19% y-o-y mainly due to low spot prices.
However, the outlook for China is different. The consulting company believes China’s LNG demand in Q2 will grow 12% to 15 Mt, as the giant shifts focus to industrial demand recovery.
This post appeared first on Kallanish Energy News.