Asian LNG Price Drop Predicted

Survey of analysts in agreement of expected 30% drop in 2015 due to oversupply and low oil cost.

Asian LNG prices could drop by a third next year, a survey of analysts and forecasters by Reuters believes. The precipitous drop from average prices of around $15.50/MMBtu this year to nearer $11.00/MMBtu next year is largely down to the market entering a period of oversupply, and is exacerbated by the incredibly low oil price.

“Demand is a lot weaker than we anticipated just six months ago,” Gavin Thompson, the head of Asia-Paciic gas and power at Wood Mackenzie said. Presently, even in winter, the price of LNG in Asia is hovering around or just below $10/MMBtu, a significant drop from levels double that in January 2014. Reuters polled a series of analysts, all of whom were bearish on the price of LNG in Asia, home to the top five LNG importers worldwide last year. Overall Asia takes around three-quarters of all LNG exported across the globe.

Prices in Japan, the world’s largest customer for LNG (where 87.8mtoe/y was imported last year) will drop to around $11/MMBtu if oil prices remain at around $75/bbl. If the price of Brent rises $10/bbl more, the price paid for LNG in Asia could average $12.60. Energy Aspects’ Trevor Sikorski told the news agency that “the first quarter of 2015 could be the last hurrah for LNG prices for a while. If north east Asia is mild again, then the ramp up of prices could be really very subdued and will
lead us into a couple of years of oversupply.”

Various LNG projects signed off in the early- and mid-2000s are coming online shortly – particularly export plants in Australia, with 5mtoe expected online throughout 2015.

Posted in: