Commodity- Commodity Markets In 2020.

LNG

The Researchers analyzed that the market is still struggling to digest the glut of LNG that they are presently experiencing. Asian LNG prices have been weak for much in 2019 as they continue to see a ramp up in supply from the US, Australia and Russia.

The autumn rally that they have seen has been short-lived, with the market under pressure once again even as they move into winter. The pressure on Asian prices has also had an impact on hubs in other regions, with record volumes of LNG making their way into Europe this year. They predict much of the same for next year, with supply expected to ramp up further while there will still be questions about the demand outlook, particularly given concerns over slowing growth and contracting factory activity.

The gap between LNG supply and demand growth has widened in 2019, with demand unable to match the pace of supply they are seeing at the moment. Global LNG supply has increased by around 30-35mt in 2019 with most of this coming from the US, Australia and Russia.

They also hoped that another 30mt of LNG supply could be available to the market in 2020 as capacity start-ups in 2019 (including Cameron T1, Elba island and Freeport T1) continue to ramp up while new projects (including Freeport T2-3 and Cameron T2-3) come online over the course of 2020. China's LNG imports have increased by 14 percent year-on-year to 47.74mt over the first 10 months of 2019, healthy growth by any standard. However, this masks some concerns.

This level of demand growth is much lower than the 30 percent+ seen in recent years. In addition, LNG imports in the month of October fell 11 percent YoY- which is the first YoY decline in LNG imports since July 2016. There are a number of reasons why growth has slowed. Previous growth rates were unsustainable and largely reflected the coal to gas switch for home heating. Furthermore, with another surplus year expected for the LNG market, and assuming similar trends in the Asian market once again in 2020, it appears that they will continue to see sizeable LNG inflows into Europe. As things stand at the moment, this supply is likely to keep the pressure on European hub prices.

However, negotiations around the Ukrainian transit deal for Russian gas, which is set to expire in January, present a key upside risk for the European market. Failing to come to a new deal will be a bullish development for the European market. The Russians are reluctant to provide another 10-year transit...