Energy Finance

In the first half of 2009, the LNG market proved to be truly global as supply and demand fundamentals forced regional prices to converge, according to a recent report by London-based Barclay Capital.

“With demand deteriorating sharply in Asia, spot prices for the majority of the Pacific basin have collapsed to levels below those in Europe and the U.S.,” says James Crandall, analyst. “Meanwhile, in the Atlantic Basin, as we had anticipated, the relative weakness in U.S. prices compared with European benchmarks is proving to be a limiting factor for U.S. LNG imports.”

Prospects for global LNG demand remain bleak at this point, he says. Economies in the major Asian LNG importing countries continue to struggle, and strength from some of the emerging market participants is only offsetting a part of the demand declines in Korea and Japan.

Europe, however, continues to take record LNG volumes as its prices remain strong. Given current supply and demand trends globally, Barclays expects LNG imports to the U.S. to show only modest growth for the rest of the year, and average 1.6 billion cubic feet per day in 2009.

“We look to European storage levels and the trans-Atlantic price differentials as a leading indicator for U.S. LNG import trends,” he says.

For more in-depth analyst, register for Oil and Gas Investor’s LNG webinar, to be held on July 8, at www.oilandgasinvestor.com.

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