LNG: Intercontinental to inter-regional?
Price differentials are threatening the economics underlying global LNG arbitrage. But the lower prices may unlock competition within regions
It was all going rather well for efficient global LNG trade. The associated gas boom that accompanied the US shale oil revolution drove Henry Hub prices to bargain-basement levels just at a time when the country was developing its first wave of liquefaction and export capacity, most of it linked to those Louisiana prices. An Asian market with an increasing thirst for gas, particularly in China, provided an obvious outlet for these volumes, particularly because the economics worked. As soon as the Opec+ deal in the second half of 2016 pushed oil prices upwards from their sub-$30/bl lows, Asian gas prices—linked largely to oil—decoupled on the upside from global gas supply-demand fundamentals.
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