In the next decade, LNG supply will remain surplus

Matt Smith, ClipperData Data's crude oil analyst, said that the LNG market faces a big problem: It is expected that in the next 10 years, the supply of LNG will exceed the demand. This mismatch between supply and demand is the biggest doubt of the market's prospects for the LNG market in the past five years.

Affected by the imbalance between supply and demand, natural gas prices have fallen sharply to US$1.70 per million British thermal units, a 17-year low.

Smith said that even if the market's supply response and the continued increase in crude oil demand continue to increase, the demand for liquefied natural gas does not increase, because these reform projects will take some time to achieve results.

In fact, LNG supply has recently shown signs of accelerating growth. On February 24, the United States exported the first LNG from Sabim Pass. Energy giant Chevron plans to implement its $54 billion Gorgon project next week for its first shipment.

Despite concerns about the health of the LNG market, Chevron CEO John Watson stated on March 9 that the market will be optimistic.

Oil and gas prices are under pressure. The price of natural gas in the United States is very low, and the price of LNG in the spot market is also very low.

Watson said Chevron sold 75% of its gas in two Australian projects. The company began to notice that the oil price has strengthened, and it believes that the company will increase production when the oil price rises. He noticed that Chevron could foresee its Gorgon project to be profitable given the oil price of $40/barrel.

The price of West Texas light crude oil in the United States is about 36.50 US dollars / barrel, while the price of Brent crude oil is less than 40 US dollars / barrel. The data shows that crude oil inventories in the United States increased by 4.4 million barrels last week, causing inventory to hit a record high. Afterwards, the prices of these two kinds of crude oil fell by 3% overnight.

Smith, an analyst with ClipperData Data, said that although Kuwait stated on March 9 that if all major oil-producing countries join the cut agreement, the country will also freeze crude oil production, and the oil outlook in the short term is unlikely to change significantly.

The rise in oil prices in the past few weeks was due to the freezing of crude oil production or the expected cut of crude oil supply. However, in reality, the freezing of crude oil production or the reduction of crude oil production have not received the consent of oil producers.

Russia and OPEC countries met in Doha last month to discuss measures to boost the crude oil market and agreed to freeze crude oil production at the level of January this year. Although this move boosted market sentiment, due to Iran’s refusal to participate in joint operations, the actual frozen crude oil production plan is rarely implemented.

Kuwait and Saudi Arabia say that they want to freeze the production of crude oil, but so far it has only talked about it, and has not paid much practical action.