Fundamentals

Published at 15:50 28 Sep 2018 by . Last edited 11:18 22 Aug 2019.

In August, hot weather boosted demand in Asia and prompted strong imports to refill stocks, while low reservoir levels in Brazil offset declines elsewhere in Latin America and increased LNG takes in the region. Middle East imports declined as Egyptian domestic production increased, eroding LNG demand. Total global LNG imports in August expanded by 0.9 Mt y/y to 26.5 Mt and we expect demand growth to continue through the winter, during which we forecast takes will be 11.0 Mt higher y/y.

Chinese imports were boosted by the slowdown in pipeline flows and the start-up of two new LNG receiving terminals, and totalled 4.71 Mt, their highest since peak winter flows and up by 1.57 Mt (50%) y/y. With an additional 3.2 Mtpa of new regas capacity set to start up before year-end, we expect LNG imports to rise in Q4 18 and Q1 19 by a combined 10-11 bcm y/y.

Japanese LNG imports rose by 0.3 Mt y/y in August to 7.6 Mt, as three months of unusually hot weather has left the region with plenty of late summer restocking demand. We forecast that Japan will import 0.83 Mt less y/y in Q4 18 and 1.3 Mt less y/y in Q1 19 on mean temperature reversions and higher nuclear availability.

Strong cooling demand due to higher temperatures than normal increased South Korean LNG imports in August by 0.32 Mt (12%) y/y to 2.9 Mt. With the heating season now on the horizon, LNG import demand should remain stronger y/y as imports are needed to replenish stocks. We expect LNG takes to be up by a combined 1.5 Mt y/y through Q4 18 and Q1 19.

LNG imports to India grew by 0.09 Mt (6%) y/y in August despite high prices for spot cargo deliveries and a depreciating rupee, which meant India was paying more for the same volume of dollar-indexed shipments. LNG imports could see a bump from the three regas terminals set to enter service in 2018, although the ramp-up in utilisation could be slow if downstream infrastructure is not built on time. Delays to these pipelines, along with continued high prices, could serve as a significant headwind to our projection for 3.0 Mtpa import growth y/y in 2019.

Latin American imports jumped for the fourth consecutive month in August, by 0.3 Mt y/y to 2.2 Mt, driven by a 0.2 Mt increase in Brazilian takes on low reservoir levels that prompted stronger power sector gas burn. Despite expecting Brazilian LNG imports to increase through Q4 18 and Q1 19, supported by low-but-improving hydro reservoir levels, we forecast total Latin American imports will drop by 0.3 Mt y/y to 5.6 Mt during the same period. We expect declines in gas demand in Argentina and Chile as the southern hemisphere moves to its summer, while Argentina’s growing shale production in the Neuquen province will also replace some LNG demand in both countries. We now expect Mexican LNG demand to slow faster over the coming two years than previously thought on expected pipeline capacity additions by year-end.

Countries in MENA imported 1.35 Mt of LNG in August, lower y/y by 0.34 Mt. Rising production in Egypt, and to a lesser extent Kuwait, continues to put structural downward pressure on total imports even during the peak of summer. Work continues to clear the path for regular Egyptian exports and we forecast LNG takes to decline by a combined 0.9 Mt y/y in Q4 18 and Q1 19.

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