What is next for LNG?
The International Energy Agency stated on Thursday that despite slower Russian pipeline gas exports to Europe, global gas markets are progressively rebalancing. However, LNG markets are anticipated to remain tight in 2023.
When Russia cut its pipeline gas exports to the EU by 80% in 2022, a worldwide energy crisis led to severely disrupting both the worldwide gas markets, mainly in Europe. The impact was lessened by mild weather, a rise in LNG exports, and a sharp fall in gas demand. This left 60% of Europe’s storage capacity filled.
Unfavorable weather, such as a dry summer, decreased LNG supplies, and the potential for additional declines in Russian deliveries to Europe may pose some future risks. During the 2022–2023 heating season, gas consumption in Europe decreased by 16%, or 55 billion cubic meters (bcm), which is a record.
According to EIA, the EU only needs to inject half as much storage as it did in the summer of 2022 to attain its 90% storage goal by the start of the heating season in 2023–24. The projected increase in global LNG supply for 2023 is only expected to be 4%, which will not be enough to make up for the anticipated decline in Russia-supplied gas to Europe.
New York moves to ban LNG
In an effort to cut carbon emissions, New York became the first US state to adopt laws prohibiting the utilization of LNG for heating and cooking purposes in some new structures. Industry organizations, however, have criticized the initiative as being too troublesome and expensive.
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Late on Tuesday, the Democratic-controlled Assembly and Senate adopted the clauses, which are part of New York’s $229 billion plan. The general structure of the spending plan was agreed upon last week by Governor Kathy Hochul and lawmakers.
Many of American communities have banned or discouraged the use of LNG in new construction. This is mainly to address issues with public health and the environment.
LNG trades in a steady range
LNG keeps trading in the same range, between $2 and $2.5. There are not many price movers outside of the heating season.
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The bears keep looking and re-visiting the $2 support many times. The bulls on the other hand are not active very much, however aim to cash in at around $2.4. This level is the current resistance.
Trading is still far below the 200-day average of $5.189, and there is not much potential to even get close to this level at this time.
LNG futures 1D chart, source: tradingview.com, author’s analysis