The liquefied natural gas (LNG) market contracted a third month in July as countries continue to struggle with the economic fallout from the coronavirus pandemic.
Global exports last month dropped 9.4 per cent from the previous year, the steepest year-over-year decline since at least December 2017, according to ship-tracking data compiled by Bloomberg.
The biggest cuts came from the US and Australia. On a monthly basis, exports inched up 2.5 per cent from June levels.
The decline is likely to continue into 2021 as several export projects are struggling to find financing. The LNG market was growing at a rapid pace but came to a grinding halt due to the pandemic. The next decade could see a supply glut.
Some of the world’s biggest buyers of LNG have struggled to make room for contracted shipments this summer as COVID 19 stalled economic activity and left stockpiles near capacity. This has forced exporters to make the decision to lower output and withhold cargoes from the market to balance global supplies.
US exports fell about 40 per cent from a year earlier due to customers potentially cancelling over 50 cargoes slated to load from Gulf Coast projects after the arbitrage opportunities to Europe and Asia collapsed.
Spot prices in Asia, the biggest demand region for the fuel, have started to recover from record low levels amid speculation that onset of the winter heating season would boost consumption.
LNG imports fell 5.1 per cent from a year earlier as COVID-19 measures forced buyers to reduce deliveries. It was the second-straight month for declining imports, after June marked the first year-over-year drop since at least December 2017.
South Korea’s imports for July dropped by more than 800,000 tonnes compared to last year, the most of any nation, as its top buyer requested to delay shipments on high inventory levels. While Japan imported nearly 5.7 mn tonnes last month, the most since March, it is still lagging 2019 levels by about 9.3 per cent.