In the second quarter of this year, total LNG demand was down slightly at 86 mill tonnes, compared to 87 mill in 2Q19.
More specifically, Chinese LNG demand amounted to 16 mill tonnes during the period, an increase of 20% year-over-year, while demand from the Middle East was 5 mill.
In contrast, Asian demand, excluding China, declined by 4 mill tonnes and demand from Europe fell by around 1 mill tonnes, GasLog said in an overview published with its 2Q20 results presentation (see page 8), quoting Poten and Partners.
Global LNG supply was about 89 mill tonnes, an increase of 2 mill over 2Q19. US supply rose by over 3 mill tonnes, as a result of production increases from new large projects, including Cameron and Freeport, while re-exports out of Europe increased by 2 mill tonnes, or over 140%.
This growth pattern was offset by declines out of the Middle East and North Africa, where supply decreased by over 2 mill tonnes.
Looking ahead, about 94 mill tonnes of new LNG capacity is expected to begin production during 2020-2025, according to estimates from Wood Mackenzie.
In the LNG shipping spot market, TFDE headline rates, as reported by Clarksons, averaged $35,000 per day in 2Q20, a decrease from $57,000 recorded in the first quarter of this year and $49,000 in 2Q19, GasLog said.
Headline spot rates for steam powered vessels averaged $23,000 per day in 2Q20, a decrease from $40,000 in the previous quarter and $33,000 per day in 2Q19. Second quarter spot rates were negatively impacted by declines in LNG demand due, in part, to the impact of COVID-19 to the global economy, as well as high inventories of natural gas and LNG, particularly in Europe, which limited opportunities for LNG arbitrage trading between the Atlantic and Pacific basins.
Although many economies around the world have begun to reopen, the COVID-19 outbreak continued to create high levels of uncertainty for LNG demand and therefore, LNG shipping, at least in the near-term.
In addition, global gas prices and gas price differentials between the Atlantic and Pacific basins remained near their historic lows, limiting the opportunities for inter-basin trading, illustrated by the reported cancellation of over 100 cargoes out of the US during the third quarter of this year.
When combined with the scheduled deliveries to the fleet and usual seasonal trading patterns, these factors have the potential to keep downward pressure on near-term rates in the spot and short-term shipping markets.
Further ahead, global natural gas prices futures curves indicate the potential for higher LNG demand and the resumption of inter-basin trading during the Northern Hemisphere winter, which if realised, would be expected to lead to the higher usage of LNGCs.