More than a month since oil was seen to briefly hit negative territory, the global gas market remains oversupplied, according to EnergyQuest.
In its liquified natural gas (LNG) monthly report, EnergyQuest reported that the worst may be yet to come with demand falling and storage nearing capacity, creating ideal conditions for negative spot gas pries in Europe and the United Kingdom
“The global energy industry is still far from recovered from the demand reduction from the pandemic and there has been no sign of a coordinated response to address the gas glut,” EnergyQuest stated in the report.
“Top exporters still have not reduced output and stockpiles are nearing capacity (and expected to reach capacity in Europe in August) meaning the fallout could be deeper and longer than seen with the oil price.”
The report highlighted that gas prices are most likely to go negative in August or September when demand is at its lowest and storage inventories are at their highest.
However, with OPEC+ agreeing to extend full oil production cuts through to the end of July, EnergyQuest outlined that the cuts are designed to further rebalance the market during the pandemic.
“Previously the cartel had planned the 9.7 MMbbl/d cuts to end at the beginning of July, with cuts then reducing to 7.7 MMbbl/d. The higher cuts will now be extended to the end of July and nations that have not been adhering to cuts will be required to compensate member nations,” EnergyQuest stated.
In addition, COVID-19’s impact has started to show with Australian LNG shipments in dropping by seven cargoes in May.
LNG shipments were primarily down compared with April due to lower cargoes from APLNG and Ichthys, with APLNG extending planned maintenance until June 18.
Western Australian shipments were the same as in April, with Gorgon shipping one less cargo than in April and North West Shelf shipping one more cargo than in April. The Northern Territory shipped four less cargoes in May than in April.
In May, Australian projects shipped 6.4 million tonnes (Mt), equalling 93 cargoes, which was lower than 6.9 Mt in April.