Summary

Weak seasonal demand in Asia makes a summer LNG spot price rally unlikely. Europe's hub prices are finding support from a tightening market while hub prices in North America are under pressure from strong storage levels.

Forecast highlights

  • The declines in average LNG prices into China and Taiwan levelled off in the spring. While prices into Japan and South Korea fell in May, the declines should ease over the summer.
  • Spot LNG prices in Asia Pacific are below $7/MMBtu. With weak summer demand and declines in LNG imports in the region, there could be limited support for summer price rises this year.
  • European hub prices have found supply-side support from the cut to the cap for Groningen. Further restrictions in supply will limit falls in regional hub prices. 
  • Summer demand in Europe could be weak, but hub prices will also be kept from falling by the increased pace of storage injections expected over the coming weeks. 
  • Bearish fundamentals in the US will keep the Henry Hub front-month futures price below $3/MMBtu for the rest of the current injection season.
  • Regional spot gas prices in the East Consuming Regions of the US and Canada will trade at a discount to the Henry Hub spot in the coming months. The Transco Z6 spot price registered an all-time low of less than $1/MMBtu in early July.
  • Spot LNG prices in Latin America are expected to remain below $10/MMBtu in the coming months despite dry conditions in Brazil, Mexico and Chile.
  • High LNG demand from consumers in the Middle East and Africa is unlikely to provide much support to spot LNG prices globally for the rest of summer.
  • The Brent crude front-month futures price is expected to come under further pressure from the debt crisis in Greece, the crash in the Chinese stock market and the recent nuclear deal between Iran and the P5+1.