18.04.2023 –The energy market and consumers have responded to the Ukraine war. The Gazprom gap appears to be closed. Globally, there is currently an oversupply of liquefied natural gas.
The U.S. in particular has stepped in as a major exporter for Russia. Pictured here is the daily chart of Natural Gas. According to Bloomberg, the global market is currently virtually flooded with natural gas.
Source: Bernstein Bank GmbH
This is because demand is subdued. Due to the predominantly mild winter and the reduction of consumption in the West, inventories filled up from South Korea to Spain. As a result, tankers carrying LNG often have trouble finding a port, according to Bloomberg, and are at sea for weeks. LNG means Liquefied Natural Gas, which is natural gas that is liquefied by pressure and cooling, loses volume and can thus be transported on special tankers.
Global oversupply
This threatens a glut of gas that could keep pressure on LNG prices in the coming weeks, Bloomberg Intelligence further judged. Meanwhile, global LNG exports climbed toward an all-time high in March, partly due to an increase in U.S. production, it said. In addition, China reported record LNG exports again, according to Corona. Japan, actually a large buyer of LNG, was offering supplies to prevent oversupply at home, RBC Capital Markets also explained.
Fuel and fertilizer
Others are nevertheless bullish on the matter because of the indispensability of gas. Natural gas is used to produce chemicals, fertilizer and hydrogen; as well as fuel for power plants in energy generation. About 20 percent of Europe’s electricity came from gas-fired power plants last year, according to S&P. With Russia gone, the market no longer has a buffer, James Henderson, head of gas research at the Oxford Institute for Energy Studies told “S&P Global Commodity Insights.” Tsvetana Paraskova of Oilprice.com, meanwhile, warned that more than a dozen LNG export projects in the U.S. are at risk. That’s because increased costs and tougher competition for financing could torpedo the terminals.
We look forward to seeing how the natural gas situation develops. Bernstein Bank wishes successful trades and investments!
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