Spot LNG to stay firm, but term contract prices lower on post-2025 supply glut - Woodmac  

London (Quantum Commodity Intelligence) – The LNG long-term contract market and spot markets are travelling in opposite directions, with long-term buyers having the upper hand until such a point that fresh demand outstrips planned supply increases from Qatar and Russia, global energy consultancy Wood Mackenzie said in a report published this week.

Noting an influx of new supplies in the second half of the decade, Woodmac said, "buyers in the market for LNG contracts starting after 2025 are spoilt for choice - there are more volumes available than they need."

"Those who need volumes before 2025 face higher spot prices and expensive short-term deals," the report added.

Benchmark JKM Asia spot prices moved above $12/mmBtu this week, while European TTF spot prices are above $10/mmBtu, leaving both at seasonally high levels.

Earlier this year JKM traded at $40/mmBtu as a winter cold snap sent prices spiralling to record highs, demonstrating how the LNG market remains prone to short-term spikes during periods of high demand.

Woodmac suggested a possible solution, whereby purchasers may be able to use longer-term contracts which ‘bridge’ the short and long-term markets. A bridging contract would potentially give buyers lower prices over the next five years in exchange for the seller receiving the security of long-term contracts, said Woodmac.

Giles Farrer, director, global LNG at Wood Mackenzie, said: "Spot prices are presently averaging around $12 per mmBtu for June and July delivery into North-East Asia, their highest at this point in the summer for over six years."

"While prices may briefly dip next year, Wood Mackenzie expects this rally to extend over the next five years because rising Asian LNG demand will outstrip global LNG supply growth, pulling Atlantic supply into the Pacific and tightening the market."