The market is being flooded by liquefied natural gas (LNG) excess spot cargoes as demand slump on the back of the coronavirus pandemic hurting industrial output.
Several of the world’s biggest consumers of LNG such as India in Asia, along with Italy and Spain in Europe have nosedived as the countries have imposed lockdowns and limit travels to curb the spread of the virus.
Asian spot prices were driven to a record low last plumbed in February when China’s demand sank. Other than that, prior to the virus crisis, warm winter and the impact of the US-China trade war had already damaged spot LNG prices to seasonal lows.
Asian spot LNG prices slumped below USD3/mmBtu this week after increasing for three weeks in a row. Last month, it hit a record low of USD2.70/mmBtu.
The buyers in North Asia have practiced a downward quantity tolerance (DQT) on negotiations of annual delivery contracts, allowing some to cut volumes of up to 10%. The option has pushed sellers to offer the unsold term volumes in the spot market.
Producers like Qatargas, Cheniere Energy, and Petronas are offering what seems to be an excess spot cargoes as the result of cancellation by their buyers. The details could not be confirmed.
