Following a year of Coronavirus pandemic effects, demand for liquefied natural gas (LNG) is expected to recover rapidly in 2021.
Asian spot LNG prices have already recovered to the highest levels since 2014, after suffering a record low in April this year. The recovery was driven by colder weather in key importing nations, production outages at major projects and shipping route congestion.
According to a Bloomberg report, demand for LNG as a fuel for heating and power generation is rising faster than any other fossil fuel. While the outbreak of Coronavirus pandemic derailed the wider adoption of LNG as fuel replacing coal in 2020, nations like China and India remain the major demand drivers.
LNG imports in 2020 remained fairly flat compared to the previous year. It was a setback for an industry that enjoyed a 10 per cent annual growth rate since 2016.
It is expected that the demand for LNG will recover in 2021. LNG demand takes up 10 per cent of the total global gas demand. The rate of LNG demand recovery may well depend on the performance od Pakistan, India and Bangladesh.
S&P Global Platts notes that LNG deliveries to Asia have recovered since the height of the pandemic with a further sharp rebound expected in 2021.
European demand is continuing to suffer under the Coronavirus pandemic and resulting lockdowns. The recovery could remain neutral as Europe continues to rely on pipeline deliveries which will receive a boost through new links with Azerbaijan and Nord Stream 2.
The LNG supply suffered during the year as unplanned maintenance at export projects in Australia, Qatar and Malaysia tightening the market in the second half of the year. In addition, Panama Canal navigation delays curbed supplies to Asia.
Should these disruptions persist, prices could remain high during 2021. However, traders Vitol and Trafigura expect the market to remain oversupplied in 2021.
U.S. projects saw about 200 cargoes canceled during the summer of 2020 and some more cancelations are expected next year which would keep the market balanced.
U.S. LNG market is expecting to profit from a promising deal-making environment with China in 2021 as Joe Biden takes over as president on January 20.
This post appeared first on Offshore Energy.