Compared with the long-term cooperative gas market linked to the oil price, the bidding market for spot supply has many advantages. Nevertheless, the change of LNG spot price can not fully reflect the current market situation. The LNG market is affected by such factors as the LNG supply agreement price or the pipeline gas price linked to the oil price. So far, these factors still have a great impact. For example, the 20% - 25% increase in oil prices in 2017 is closely related to the growth of gas prices in the same period. Based on this correlation, it can be predicted that the natural gas market will be optimistic in 2018.
There was a period of time in the past when the spot price of natural gas fell sharply compared with the agreed price, which occurred when the market shock was serious, such as from 2008 to 2009. Before forecasting the natural gas market situation, it is advisable to consider this question: will there be a large gap between LNG production and consumption in the future? It can be said that there has not been a large gap between LNG production and consumption so far - the supply is accelerating and the demand is growing steadily. In 2017, the world's LNG demand increased by about 40 billion cubic meters, of which three quarters (30 billion cubic meters) came from the Asia Pacific region and the rest (10 billion cubic meters) came from the European market.
The growth of China's natural gas procurement has supported half of Asia's demand growth. At the same time, China is also the country with the fastest growth in natural gas procurement, and its domestic natural gas demand is likely to further increase in 2018. South Korea's natural gas demand also grew very fast (increased by 5 billion cubic meters).
However, in terms of total procurement volume, Japan still ranks first, followed by China, and South Korea ranks third.
Supply and demand of natural gas in some regions
The increase in EU natural gas imports (by about 10 billion cubic meters) is mainly due to several countries in the Mediterranean basin (France, Italy, Spain and Türkiye). The demand of northwest European countries is basically stable, and the LNG import of Britain has even decreased. It is worth mentioning that LNG competes fiercely with pipeline natural gas in Europe, especially in Central Europe. In 2017, the net import volume of EU natural gas increased by about 30 billion cubic meters, of which most of the increase was pipeline natural gas. In fact, the increase of 10 billion cubic meters is already a large number for Europe. Thanks to the strong demand for natural gas in the region, the current LNG purchase volume has ended the downward trend around 2015 and returned to the level of 2012.
The LNG import situation in the Middle East is not as optimistic as expected. After the import increased by 10 billion cubic meters in 2016, the import volume decreased slightly in 2017, partly because the development of domestic gas fields in Egypt reduced the regional import demand.
The growth of LNG supply in 2017 mainly comes from the increase of capacity in Australia and the United States. As the two new leading forces in the global LNG market, the LNG capacity of Australia and the United States is rapidly increasing.
Australia's supply growth (about 15 billion cubic meters in the whole year) mainly comes from the new capacity of Wheatstone and Gorgon projects. Almost all of the country's new production was shipped to China and Japan (the latter's LNG procurement from Qatar was slightly reduced). However, the actual output in Australia is still lower than expected, because according to previous expectations, the new production capacity in Australia may reach 25 billion cubic meters in 2017.
It is expected that after the ichthys and Prelude projects are put into operation this year, Australia's annual LNG export capacity will increase by 17 billion cubic meters. Following the above projects, the capacity of projects under construction in Australia will be very limited, mostly 5 billion to 10 billion cubic meters per year.
