Research views: Global Gas market outlook

By Bernard Dahdah, Senior Commodities Analyst and Joel Hancock, Energy Analyst

Gas goes global; how oversupplied markets are resulting in increased price convergence across regional hubs.

The global gas market is becoming more integrated as flexible LNG (liquified natural gas) cargoes respond to price signals in regional markets. The LNG trade is becoming increasingly dynamic as contract lengths become shorter, resale and destination limits are lifted, and trading houses take a larger share of the market. In 2018, 32% of cargoes traded on a short-term basis or spot basis. This has led to an increasing degree of price convergence across Europe, Asia and the US.

With a slowdown in Northeast Asian LNG consumption growth, new LNG supply growth through 2019 has increasingly had to clear into European gas storage. European gas prices have acted as a technical floor for Asian LNG prices. As European gas storage approaches capacity, and given the US' position as a marginal LNG exporter, US gas prices could act as a technical floor for European prices, if a significant volume of flexible gas is required to be shut in.

Explore the dynamics of global gas market integration with the following video.