World LNG tightness means ‘excessive market volatility’ in 2023: S&P World

S&P World Commodity Insights proclaims 2023 power outlook

US LNG export capability missing till late 2024

European fuel disaster continues; China drives world power demand

Excessive volatility within the world LNG market in 2023 will proceed to encourage US LNG export terminals to run at excessive ranges, however US Henry Hub costs stand to fall as liquefaction capability additions flatline, in line with S&P World Commodity Insights’ newest 2023 power outlook.

An absence of latest liquefaction services coming on-line globally stands to constrain pure fuel provide progress regardless of persistently excessive costs, in line with the outlook. The end result can be world fuel markets pressured to stability on demand destruction and present shares as an alternative of LNG provide progress, a dynamic that can be notably obvious in Europe, the place fuel and energy markets could also be even tighter in 2023 because the area faces its first 12 months with out vital volumes of Russian pipeline fuel.

“There isn’t a slack within the system,” Michael Stoppard, world fuel technique lead and particular adviser at S&P World, mentioned throughout a Dec. 8 briefing with reporters. “So we are able to count on a continuation and a reinvigoration of maximum market volatility that we’ve got seen in each fuel and energy costs.

“Disruptions on the provision aspect and any clear deterioration of financial output can be met by markets with a unstable value response.”

Europeans have scrambled to construct LNG import infrastructure in an effort to seek out options to pipeline deliveries from Russia following its invasion of Ukraine in late February. Constraints at present European regasification terminals in 2022 have led to a dislocation between the northwestern European delivered LNG value and the continental TTF value, with the Platts DES Northwest Europe reaching a document low cost of greater than $29/MMBtu to TTF in early October earlier than tracing again to round $10/MMBtu at present.

S&P World expects a big enhance in European import infrastructure over the subsequent 12 months that would ease the bottlenecks, with some 10 new LNG import terminals proposed or constructed that might be on-line by the tip of 2023. Loosened regasification constraints are anticipated to tighten the unfold between delivered LNG at European terminals and continental fuel costs, mentioned Ross Wyeno, lead analyst for LNG Americas at S&P World.

“Our perception is that the online affect of that can be to attract world LNG costs upwards this winter in order that Asian patrons are pressured to straight compete with the fuel patrons inside Europe,” Wyeno mentioned. “Then probably we might see costs trailing off a bit extra subsequent summer time.”

Throughout power markets, China’s coronavirus coverage is a very powerful elementary issue for world power demand in 2023, mentioned Dan Klein, head of Power Pathways at S&P World. Lockdowns softened China’s power demand in 2022, offering reduction for fuel, oil, and coal markets as Europe scrambled to interchange power provides from Russia following its invasion of Ukraine in late February.

However the S&P World outlook presumes China’s whole power demand will enhance by 3.3 million barrels of oil equal per day in 2023 from nearly no progress in 2022, representing 47% of the worldwide power demand progress subsequent 12 months.

US LNG export additions flatline in 2023

Persistently excessive costs have saved present US LNG terminals working at or close to near full capability in 2022. US feedgas demand was about 11.5 Bcf/d Dec. 8, after hitting almost 13 Bcf/d Dec. 1, in line with S&P World information. The Dec. 1 flows marked the very best stage of US LNG feedgas deliveries since earlier than an early June explosion and hearth on the Freeport LNG plant in Texas pushed some 2 Bcf/d of fuel again into the home market resulting from lack of feedgas demand.

Freeport LNG is working to renew manufacturing by the tip of the 12 months. Aside from the Freeport return, S&P World described a “distinct lack of progress” in North American LNG capability till late 2024, which is when the developer of the 18.1 million mt/12 months Golden Go facility beneath building in Texas expects to start out manufacturing.

The dearth of latest US LNG export capability and home manufacturing that’s anticipated to rise by almost 3 Bcf/d are components contributing to softer Henry Hub costs in 2023.

S&P World forecasts costs at Henry Hub will common $5.47/MMBtu throughout 2023, peaking close to $7/MMBtu throughout the primary quarter earlier than dipping under $5/MMBtu throughout the second and third quarters of the 12 months amid tight fuel balances and financial headwinds within the US and overseas.

Firms near the guts of the US fuel worth chain concur that 2023 is prone to provide extra fuel value volatility, with Freeport LNG’s restart certainly one of a number of components promising to stir markets within the 12 months forward.

“I believe there will definitely be volatility,” Kinder Morgan CEO Steve Kean informed analysts on the Wells Fargo Midstream and Utilities Symposium on Dec. 8. “And as we get LNG again in ….these are large strikes, large chunks of demand approaching.”