Vitol warns on LNG production shut-ins

The trading house fears that US liquefaction plants may join the list of capacity on the side lines next year

A market’s price is the function of the cost of the most expensive supply required to meet demand. A low price should indicate at least the potential that some of the highest cost supply is ‘out of the money’ and should either shut-in to balance the market or—if it continues producing—utilise storage infrastructure to wait for an oversupplied market to rebalance. So, what is happening in the LNG and global gas markets, where consistently low prices suggest the highest cost producers may be facing this choice? Petroleum Economist spoke to Pablo Galante Escobar, global head of LNG trading at commodity trading heavyweight Vitol, to get his view.  We currently have low prices, but we are not see