The price of LNG appears to be set for another downturn in 2016 with new projects in Australia and the US weighing on spot prices according to a new report.
Price pressure from new supply is being compounded by a plunge in oil prices according to the Commodities Research and Forecast team at Thomson Reuters.
The team looked at the effect of supply surplus on the Asian LNG market.
It expected the Asian LNG spot price to trade in the $4.5-6.0/MMBtu range for most of 2016, compared to an average of $7.5/MMBtu in 2015.
A wave of new LNG supply, primarily from several Australian projects and Sabine Pass in the US, is weighing on LNG spot prices. The price pressure from the new supply and now feeding into long-term oil-indexed contract prices.
Report author Anne Kat Brevik said: ” The tidal wave of new LNG supply is building up as demand from large importers in NE Asia is relatively
weak.
“The combination of increased oversupply and more flexible cargoes is expected to lead to a stronger convergence of regional prices between Asia Pacific and the Atlantic basin. This combination also serves as a window of opportunity to establish a successful LNG trading hub in Asia.”
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