A ‘tidal wave’ of LNG supply will reshape global markets, says RBC Capital

The biggest influx of liquefied natural gas, or LNG, supply is coming online and it will transform the global market, bringing about wide and enduring effects, said RBC Capital Markets.

“A wave of new LNG supply —the biggest yet— is set to reshape the global market in the coming years, with broader implications than prior growth given increasing inter-linkages between regional gas markets following the Russia-Ukraine conflict,” analysts from the investment bank wrote in a note. 

The supply injection is likely to thrust the market into an extended period of oversupply by the end of 2026, which will remain until 2030, with prices possibly moving below double digits, analysts such as RBC’s Adnan Dhanani have projected.

Futures for the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas transactions, were trading at $12.78 per million metric British thermal unit on Wednesday on the New York Mercantile Exchange.

Throughout the year, a growing chorus of analysts have warned that tepid demand growth coupled with looming waves of export capacity could lead to a massively oversupplied market. As a stream of planned infrastructure continues to flood the market, it’s unclear if demand will increase to absorb each wave.

Oversupply and depressed prices underscore the bearish sentiments in the LNG sector, said Rystad Energy senior analyst Masanori Odaka. Suppliers are now increasingly prioritizing LNG used for shipping utilization over arbitrage opportunities, i.e. profit margins.

Commodity arbitrage involves the simultaneous or sequential buying and selling of commodities across different markets to profit from the price difference.

Global LNG trade has doubled in the last decade, growing from around 240 metric tons in 2014 to more than 400 metric tons last year, largely caused by the disruption of Russian pipeline gas to Europe, according to RBC Capital. Some had perceived the geopolitical risk as an opportunity in the market.

The investment bank projected that global liquefaction capacity, the total amount of LNG that can be produced annually, will grow by around 50% by the end of the decade. The U.S. and Qatar will hold onto their position as the world’s biggest suppliers, with a combined market share of almost 50% in 2030, RBC added.

Many private companies and state-owned entities have plans to boost capacity, “not only to backstop European consumption but to also capture an expected growth in consumption rates, particularly in Asia,” RBC’s analysts said.

But demand from the Asia-Pacific region, the biggest importer of LNG, is only expected grow by an average of 5% annually. Around 70% of this growth will stem from China, India and South Korea.

Meanwhile, LNG prices have not seen major fluctuations despite escalating geopolitical tensions. “Surprisingly quiet” was how Meg O’Neill, managing director and CEO of Woodside Energy, described the…