Over the last year, a frigid winter, followed by a scorching summer, enveloped the major natural gas producing regions of the world and took a heavy toll on inventory stockpiles. Inventories are being still stretched to their lowest seasonal levels in some time with only weeks before the heating season is set to kick off. But even in the face of winter, volatility in the Liquefied Natural Gas (LNG) market is at an all-time low and may be signaling a calm before the storm.
Recently, natural gas market’s volatility this year has been the lowest on record. Huge amount of new US supply that will increase production 10% this year to hit a new record — just ahead of probably hitting another one in 2019 – may also have produced a sense of complacency that continues to pervade, in spite of inventory levels that are already 20% below the 5-year average. MRP has previously noted a lack of downstream investment disrupting LNG prices in the long term, but in light of this drastic ongoing inventory reduction, a price spike could be imminent when the cold weather hits . . .