LNG Market Faces "Unprecedented Risks": Poten

The outlook for the global LNG market is bearish, with rising supply and record storage volumes in Europe creating “unprecedented risks,” according to a new report by consultancy group Poten.

Europe’s underground gas storage (UGS) is over 96% full, Poten estimated on September 27, limiting scope for increased LNG imports. Operators have been stocking up on supplies ahead of winter amid concerns over Dutch and Russian supply. The Netherlands plans to accelerate the shutdown of the Groningen gas field, while there is a risk to Russian piped volumes next year if Russia and Ukraine fail to agree a new transit contract. Poten also pointed to concerns about the availability of French nuclear supply.

The market should tighten in the winter months, but the impact of seasonal demand growth will be countered by the glut in LNG supply. Furthermore, Russia has not responded to weak prices by cutting its exports to Europe, because of political pressures and the understanding that any market share it cedes will be taken up by extra LNG.

A cold and prolonged winter will nevertheless cause gas inventories to sink, Poten said, causing a spike in LNG imports next spring and summer. But even so, it forecast that the cycle of low prices and abundant supply would likely repeat during spring, summer and autumn of next year, as rising supply continues to outstrip demand growth.