Liquefied natural gas traders anticipate a swift demand recovery in 2021 after a year in which the coronavirus pandemic prompted dramatic price swings. Colder weather in key importing nations, outages at major production hubs and congestion along global shipping routes already have combined to push spot prices in Asia to the highest level since 2014. That’s a more than sixfold jump from a record low in April, making Asian LNG the best performer among major commodities in 2020.
Demand for the fuel used in heating and power generation is growing faster than for any other fossil fuel as nations look for a cheap, reliable and cleaner alternative to coal. The pandemic derailed that growth for 2020, but China and India are emerging as major sources of demand.
“A lot of countries are looking to import LNG,” Tom Holmberg, a partner at law firm Baker Botts LLP in Washington D.C., said by phone. “I still think we are going to see growth in the LNG market.”
Uneven Demand Recovery
Global LNG imports in 2020 were roughly equal to the previous year, according to ship-tracking data compiled by Bloomberg. That was a big disappointment for an industry that has enjoyed 10% annual growth rate since 2016.
However, global gas demand is expected to resume growth next year. LNG demand, which makes up roughly 10% of the total, may rebound even faster, depending on how Pakistan, India and Bangladesh perform, said Manas Satapathy, a managing director in Accenture’s Energy business.
Shipments of the fuel into Asia have mostly recovered since the height of the pandemic, and the region’s LNG demand will rebound sharply next year, according to S&P Global Platts.
On the last day of 2020, spot Asian LNG price – the Japan-Korea Marker benchmark – rallied above $15 per million British thermal units for the first time since April 2014.
“It has been interesting to see how quickly Asian demand seems to have ramped up,” Holmberg said.
Little Changed
Breakneck growth in global LNG imports stalls in 2020 due to Covid-19
Source: BloombergNEF; Ship-tracking data compiled by Bloomberg
Note: 2020 figure is for data through Dec. 28
The picture in Europe is very different as countries grapple with a new surge of infections and lockdowns that sap energy demand. The continent is headed for a “very neutral recovery” in 2021, according to Satapathy.
Europe mainly relies on storage and pipeline gas shipments, which may be boosted with flows from a new link from Azerbaijan and the controversial Nord Stream 2 project that’s nearing completion.