Tight LNG market conditions are expected to persist in 2021 on the back of resurgent demand, with only a limited easing of availability in 2022, according to a global forecast by ICIS.
Underlying LNG demand will rise 7.9% y/y to 384.5 million t in 2021, outpacing LNG supply growth of 6.8%, according to the ICIS LNG Supply and Demand Forecast. Reliability issues and a cyclical decline in capacity additions have constrained the ability of LNG producers to respond to a demand rebound driven by robust recovery from the coronavirus pandemic and the need to refill Europe's depleted gas stocks after a protracted winter.
ICIS’ monthly global balance shows LNG shortfalls will be particularly acute in Summer 2021, before easing temporarily in the shoulder months of September and October, offering global markets temporary respite before further tightness in Winter 2021/2022.
Into 2022, global underlying demand is expected to rise 3% to 396 million t as robust consumption in China's industrial and residential sectors, alongside other high-growth markets, counteract declining gas generation mix in mature buying regions, such as Japan. Loaded volumes rise to 402.3 million t, driven by new production capacity and repairs to existing plants, leading to a finely-balanced market after boil-off losses are taken into account.
Strong demand from Asian markets and a strong draw to refill diminished European stocks is expected to lay the foundations for US production to rise 11.3% y/y to 79.8 million t, exceeding levels in Australia (77.8 million t) and Qatar (77.4 million t), temporarily placing it as the world's largest LNG producer.
“Increased flows expected through the Nord Stream 2 pipeline will be absorbed by demand to replenish Western European storage ahead of Winter 2022/2023,” said Simon Ellis, Head of Global Gas Analytics at ICIS, “Given seasonally normal temperatures, demand for injections is expected to support Atlantic basin price spreads that would allow US plant to produce near capacity levels.”
The ICIS LNG Supply and Demand Forecast provides traders and analysts unparalleled visibility into the short-term traded horizon. The impact of quantifiable events such as power plant outages are reflected in close to real-time in addition to regular monthly updates. The forecast also presents a monthly global LNG balance, highlighting expected periods of fundamental tightness and length.
“Imbalances in the model are designed to act as a tool to alert traders to arbitrage opportunities, or discrepancies in market pricing. We aim to reflect the trader's experience by quantifying these events and adding them to the forecast as promptly as possible,” said Ellis.
