2009 saw for the first time a large number of spot LNG cargoes searching for a home in the Atlantic Basin (AB) as supply outstripped weak demand especially from Asia.  The Global oversupply (Q3 09) has meant convergence in spot prices $3.10 – 4.60 per MMBtu, the tightest range for some time.

(Source Barclays Capital)

In 2009, Europe took the extra LNG cargoes (rather via pipeline where prices are linked to Crude Oil) into storage as US was flooded with gas and could not absorb additional cargoes with prices in Europe trading on small premium to the US.  2010 will see LNG demand recovery with the colder weather providing a boost.  The current forward price differential suggest that US is likely to abortb excess AB spot LNG volumes.

The global glut occurred despite underperforming supply (delayed projects), able to add 1 Bcf/d  y/y  yet well below market expectations.  Resortaion of Algerian & Nigerian production poses additional risk to global supply with the latter being less certain due to security issues.

On the demand side, sharp drop in demand by South Korea and Japan was offset by growth in India, China and Taiwan.  New regasification plants, has meant that Latin America received 31% of 160 MMcf/d more LNG in 09 than previous year. Kuwait has also started to receive LNG cargoes (Shell – Gazprom).

The report cites that more spot cargoes are being traded with growing number of market participants seeking to arbitrage regional price differentials.  Expect 2010 to see spot LNG prices around the world to again trade closely together.