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| Thu, 14th May 2020 16:19:00 |
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LNG Price War Could Send Natural Gas Into Negative Territory |
Jousting for market share at a time of massive supply/demand imbalances was the key reason why oil markets recently entered uncharted waters after dipping into negative territory. Unfortunately, leading natural gas players could be contemplating the same folly as the oil protagonists.
Oil prices have staged an impressive recovery thanks to demand starting to bounce back as well as ongoing production cuts both by OPEC+ and IOCs in the U.S. and elsewhere.
However, the industry is far from being out of the woods.
Whereas many oil punters now feel that negative prices are unlikely to happen again any time soon due to the developing tailwinds, CFTC recently fired a warning to brokers, exchanges, and clearinghouses that it actually remains a distinct possibility.
Natural gas markets risk treading the same path as oil.
Hard hit by a double whammy of weak demand and storage nearing tank tops, Qatar, the world’s biggest LNG producer, may very soon have to bite the bullet and curb output or risk cutting prices and finding itself in a battle for market share with the likes of Australia, U.S., Russia, and Norway.
Lose-Lose Proposition
Either way, it's a lose-lose proposition for Qatar, though the second option would be far more perilous for the LNG market, especially for U.S. exporters.
Qatar began sending its LNG exports to northwestern Europe in February after the coronavirus pandemic engulfed its main Asian markets and crippled demand. However, it was not long before Europe itself started feeling the heat of the health crisis with demand sharply plummeting in April. The Persian Gulf state has now been forced to borrow a leaf from its oil brethren by storing its excess LNG cargoes--which the country's NOC, Qatar Petroleum, does at Belgium's Zeebrugge import terminal where it has booked all the import capacity till 2044.
Read original full article
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