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Oil glut prompts LNG producers to cut output as virus kills profit

LNG producers are looking to curtail production as global liquefied natural gas (LNG) prices fall due to oversupply on account of the Covid-19 pandemic, reports the American Journal of Transportation

17 May 2020 - 19:00

LNG producers are looking to curtail production as global liquefied natural gas (LNG) prices fall due to oversupply on account of the Covid-19 pandemic, reports the American Journal of Transportation.

A Rystad Energy analysis finds that those best positioned to reduce volumes while suffering the least possible financial damage are APAC LNG terminals, specifically the eastern Australia projects and NWS LNG, plus some US plants that have been operational for a longer period of time such as Sabine Pass and Cove Point.



These US facilities were built during recent bullish sentiment which expected sustained demand growth from APAC buyers; medium sized compressors offered a good mix of low unit production costs and relatively low gas quality variation.



These same factors are now working against producers and, with relatively little arbitrage between feed gas prices and their target customers' benchmarks, the best course appears to be to cut production.



'This requires defined threshold in gas prices. Ramping up only to halt production again could spell disaster,' said Rystad Energy analyst Dane Inglis.


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