Africa Commodities Coronavirus Economy Energy FA Gas Opinion

LNG flunking after COVID stocks crisis

In the first few months of 2020, oil has faced dramatic falls in price due to Saudi-Russian collusion that aimed their prices lower than WTI in order to get a finer grip in the worldwide market.

Some crude oil suppliers even offered premiums for European nations that pledge exclusivity to Saudi oil. Because of market uncertainty and demand shifts due to Covid-19 natural gas prices saw a promising increase mid-February.

However with the escalating situation of the virus, what was a steep climb in prices eventually stopped with a 30% growth. This was very good news for African nations that mainly export LNG as could have been a great incentive to kickstart new projects in the region. bBut all of a sudden the number of cases started to rapidly increase, which caused global indexes and commodities to plummet as countries went into lockdown and trade almost came to a halt.

The rapid increase in gas shifted downwards and along with other commodities it had its worst opening since the major crashes of 2008. The indexes recovered and still had a rocky month while hydrocarbons prices fluctuated between bad to terrible leading to hysteric increases in renewable energy stocks.

Robert Sims, Wood Mackenzie research director, said in an interview to Oil Review Africa, that the collapse of LNG prices towards US production break-even was likely, the story for the rest of the year could not be more unpredictable.

“An already oversupplied LNG market comes out of a mild winter with high inventories across Europe and Asia, only to face a global pandemic which has already destroyed gas demand across China and looks increasingly set to do the same across the Asia Pacific and Europe.”

Mr. Slims also added: “Prospects of any quick recovery in the latter two have been dealt a blow by the impending economic downturn many are predicting this year, leaving the only likely balancing item left… we forecast 0.5 bcf/d of production will be lost through Q2-Q3, but there is risk that this number may prove too conservative if demand drops further.”

Furthermore, despite being eclipsed in the news, the global LNG oversupply remains. Strong production growth, weak Northeast Asian demand, prices as low as US$2.75 per m British Thermal Unit and an increasingly saturated European gas market.

Wal van Lierop, CEO at Chrysalix Venture Capital and an editor at Forbes believes that due to the current crisis it is time to source alternative energies and fuels.

”Now is the time to invest in nuclear fusion, the holy grail of energy. Now is the time to expand global energy storage and electric vehicle infrastructure…now is the time to repurpose fossil fuels for advanced new materials and food solutions. And now is the time to ramp up green hydrogen. ” Lierop said.

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