Britain’s appetite for natural gas usually declines in the summer, but this season is different with a record number of LNG tankers due to land this month.
The incoming cargoes show no sign of slowing, and will keep the pressure on benchmark prices already trading below their five-year seasonal average. That’s good news for factories and households as Brexit clouds the nation’s economic outlook.
“We can expect a significant pressure on prices this summer,” said Murray Douglas, a research director for European gas at Wood Mackenzie Ltd. “The global LNG market is strong, we will still have a lots of LNG turning from the Asian to the European markets and we still see lots of LNG deals” and approvals for new projects.
Cargoes are heading to the U.K. and other northwest European nations because thanks to the extensive infrastructure and traded hubs they can absorb any global surplus as well as handle a growing worldwide production boom. Britain is still taking imports of the super-chilled commodity even after its gas export pipeline shut for repairs this month.
LNG prices in Asia, the biggest consumer of the fuel, have also been too low to spur traders to ship cargoes east. Cooler weather is also supporting demand in the U.K.
For projects due to reach FIDs this year, read this BloombergNEF report
While Asian LNG spot prices have regained their traditional premium over European hubs, Atlantic basin suppliers such as the U.S. and west Africa are still sending most of their cargoes to Europe, their nearest liquid market. Longer term, more plants are due to start producing LNG and a number of projects from Mozambique to Russia are nearing investment decisions this year.