Global LNG markets seen 'finely balanced' in 2024 as demand under control
SINGAPORE/LONDON, Dec 19 (Reuters) - New liquefied natural gas (LNG) projects coming online this year and high stocks in Europe and North Asia in early 2024 capping demand are seen curbing spot price growth for the next six months as analysts forecast a "finely balanced" market.
Asian spot prices <LNG-AS> averaged around $18 per million British thermal units (mmBtu) this year, easing from an all-time high of $70/mmBtu in 2022 when Russia cut gas supplies to Europe as part of its war in Ukraine.
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The price surge sparked a later rush by buyers from China to Bangladesh to lock in new term supplies from Qatar and the U.S. as nations prioritised energy security, and spurred coal and renewables use at the expense of gas.
Here are some key factors to watch in 2024.
MORE SUPPLY
New gasification terminals coming online by end-2023 will drive global LNG production to 418 million metric tons in 2024, up from 405 million tons this year, according to consultancy Rystad Energy.
These include the Greater Tortue Ahmeyim project between Senegal and Mauritania, the Congo floating LNG project, the Altamira plant in Mexico and train 3 of Indonesia's Tangguh LNG project.
Projects starting next year include phase one of Plaquemines LNG in the U.S., and train 1 of Russia's Arctic LNG-2, though uncertainties over its supplies linger because of U.S. sanctions.
Still, the market is expected to be short 4 million tons against a global demand of 422 million tons, as next year's supply has been sold out under term contracts, said Rystad analyst Xi Nan.
Rystad forecasts Asian spot prices averaging $15/mmBtu in 2024, while pricing agency ICIS expects a low of $10/mmBtu from May to June before rising.
While the second half of 2024 will see more projects coming online relative to the previous 18 months, the market will remain "finely balanced" until then, "with any change on the supply side likely to cause upward pressure," said Ciaran Roe, global director for LNG at S&P Global Commodity Insights.
CHINA DEMAND
China reclaimed the world's top importer title this year, and will continue driving global demand in 2024.
Imports are seen rebounding to nearly 80 million tons next year, from about 70 million tons in 2023, according to ICIS and Rystad forecasts, surpassing 2021's record 78.79 million tons.
Demand growth, however, will depend on LNG prices, coal and renewables usage, and the availability of domestic production and piped gas imports.
"China will be the bright spot in driving LNG demand but there is a big segment there that is price-sensitive," said ICIS analyst Alex Siow, adding demand will depend on how low prices get, and how long they remain low.
Other price-sensitive Asian buyers will also continue curtailing gas consumption, using coal and diesel instead, he said.
S&P Global's Roe said China is not likely to see the growth witnessed in the latter half of the last decade unless there are significant policy changes and LNG prices fall below $10/mmBtu.
"Renewables capacity growth in China and India has been stellar, and this means limiting growth in LNG largely to citygas and industry, as well as a peak shaving fuel," he said.
EUROPE RESTOCKING
How Europe exits winter will impact its restocking efforts and the global market supply balance in 2024.
Forecasts for the region's imports next year are mixed, with Rystad Energy and consultancy Energy Aspects forecasting a rise, while Wood Mackenzie and S&P Global expecting a decline.
"Europe's LNG demand is forecast to modulate further, with the continent likely to end the winter season with higher stocks than in previous years," said S&P Global's Roe.
Energy Aspects forecasts imports of 112 million tons in 2024 versus 109 million tons this year due to "slightly higher demand" from the residential and commercial power sector and industrial demand, said senior LNG analyst Jake Horslen.
SHIPPING PROBLEMS
A severe drought cutting vessel traffic through the Panama Canal this year has restricted the number of LNG vessels going from the U.S. to east Asia, which is expected to continue into 2024.
The number of U.S. LNG vessels transiting the Panama Canal to Asia halved in November versus a year ago. Only 22 ships are allowed to pass each day, and that will be reduced to 18 from Feb. 1.
Concerns surrounding the Suez Canal also persist, as several vessels traversing the Red Sea have come under attack amid Israel-Gaza war tensions.
(Reporting by Emily Chow in Singapore and Marwa Rashad in London; Editing by Florence Tan and Christian Schmollinger)