LNG market under pressure

The LNG market suffers from a Covid-19 induced oversupply and low prices:

   

"As a result of reduced industrial and commercial activity, LNG buyers have been scaling down orders and in cases refusing cargoes invoking force majeure. Buyers in Asia and Europe have cancelled about 20 US LNG cargoes for June loading. Prices are now at a level that threatens the economics of not just new projects, but also existing gas production, with some liquefaction plants having to shut-in production – especially in the US.

Prices are now so low, around $2/mmbtu, that US LNG exporters are trading at less than half breakeven levels, weakening their position. With oil prices staying low, oil-indexed LNG prices will also stay low. And with new, and already sanctioned, liquefaction projects continuing to come into the market until 2027, the pressure on prices is expected to continue.

Demand for LNG may remain more or less flat, but it is very difficult to forecast. The International Energy Agency (IEA) estimates that there will be a 5 per cent drop in gas demand in 2020. The biggest problem, though, is increasing LNG production and oversupply – it may take years before this problem fully dissipates.

(...)

But some projects, especially those that are low-cost, are still progressing. Qatar LNG has reconfirmed its plans to expand its liquefaction capacity by 30mtpa by 2025, with another 19mtpa to be added by 2027. This is the world’s cheapest source of LNG.

New LNG export projects, and developers, need to brace themselves for a continued glut as further production is added, outpacing global demand, contributing to prolongation of depressed prices."

You can read the rest of the piece via the below link:

https://www.hellenicshippingnews.com/east-med-should-focus-on-local-markets/

 

The repercussions of the oil glut on russian foreign policy

The magazine The American Interest analyzes the impact of the oil glut on strategic aspects of russian foreign policy: 

"While the economic pain may have yet to cross Putin’s threshold, Russia, like every other country, will succumb to this new reality. Putin’s official popularity ratings have dropped to the low 60 percent range and, perhaps more importantly, for over a year polls have shown that a large majority of the Russian people think the country is going in the wrong direction. They also think that more resources should be spent on domestic problems and that Russia should pursue policies that improve relations with the West.

Putin, of course, is no democrat; he can choose to ignore public opinion. But with oil prices at inconceivable lows, the Kremlin will have to make serious decisions on where to invest what will be increasingly limited resources. Russia’s military has historically been more active when fossil fuel energy prices soar and less so when they fall. When the economic crunch hits, Russia tends to cut back on training and exercises (often with devastating consequences) before it disrupts actual operations. But this is no ordinary shift in market forces. It is a combination of Putin’s hubris in starting an oil war he thought he could win combined with a crisis nobody saw coming. Something will have to give. Recovery will be difficult for almost every country, but especially so for a country almost solely dependent on carbon earnings."

You can read the rest of the piece via the below link:

https://www.the-american-interest.com/2020/04/22/how-the-oil-shock-will-contain-putin/ 

Oil war: Russia hit by threefold calamity

Russia is afflicted by the low oil prices but also by the economic downturn due to the Covid-19-pandemia and the stagnation of the national economy that ist hurt by sanctions; russian business leaders are becoming impatient writes german newpaper Die Welt:

"The fact that Vladimir Putin was so quick after a phone call with his counterpart Donald Trump to participate in an oil cut together with Opec and other oil countries speaks volumes. Just a month earlier, he had the Saudis blown away with this request - and thus triggered an unprecedented drop in prices from $ 66 to $ 22 per barrel of the Brent variety, because Riyadh flooded the market out of anger.

Maybe he had simply underestimated the Saudis. Just as he had underestimated the corona virus. For a long time, the Kremlin had been unimpressed and kept relatively quiet. On March 17, Putin had declared in Crimea that everything was actually under control.

In the meantime, like many other countries, things blow up in his face. More precisely: in contrast to most countries even more. It is now becoming clear that Russia is getting a triple blow. On the one hand, the economy was stagnating, among other things because of the Western sanctions and the associated isolation, with growth of 1.3 percent."