Global liquefied natural gas (LNG) demand is set to rebound as new supply entering the market is expected to push prices down and spur interest from price-sensitive buyers, trading executives at the Asia Gas Markets Conference said on Tuesday.
Demand would develop gradually with prices below $7-$8 per million British thermal units (mmBtu) needed to stimulate demand, said Mohammad Arif, Uniper's head of LNG Asia Pacific. Asian spot LNG prices are currently at $11.20/mmBtu.
Markets like China, India and Southeast Asia have the potential to see demand recovery, said Benjamin Comninos, director of trading portfolio optimisation at Cheniere, with China and India having the potential to double imports in the next decade.
Europe, which lost around 80 billion cubic metres of gas demand since Russia’s war in Ukraine, could also see some industrial gas use return as prices fall, as not all of the demand destruction is structural, he added.
Executives also noted increasing liquidity, flexibility, and optimisation activity in the LNG market. Sid Bambawale, head of global LNG trading at ExxonMobil Asia Pacific, said increasing liquidity is a permanent move, with activity by buyers and sellers happening regardless of price levels.
"A bigger word than trading over the next few years will be optimisation," he said, pointing to the growing use of FOB-DES cargo swaps and price index management strategies. FOB (free-on-board) terms allow buyers to resell cargoes, whereas DES (delivered ex-ship) terms tend to have a fixed delivery point.
"You may have bought on TTF or Henry Hub or Brent (pricing), but as you get into a delivery period, you may not actually want that index," he said.
"These solutions around optimising and risk management will be the new wave of collaboration." Cheniere’s Comninos also notes rising interest in buyers and sellers jointly optimising portfolios, along with growing demand for cancellation options and bespoke structures in contracts.
"It used to be that oil-linked, point to point (delivery) with limited diversion rights was the norm some time ago, but now we're seeing a lot more creativity coming from some of those more traditional players," he said.
Partnerships will also be key for buyers needing scale or lacking trading or shipping capabilities, said Uniper's Arif.
"This will be probably the next big thing in the LNG industry, to see more structured collaborations as the market will get more liquid, especially with so many flexible volumes coming online," he said.
(Reporting by Emily Chow; Editing by Chizu Nomiyama)