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Liquefied natural gas is It is no longer emerging as the hot product for 2023with prices plummeting and supply outpacing new demand in 2023, Avi Salzman wrote in Barron’s this week.
LNG producers are likely to will add 20 million metric tons of LNG capacity to the market this year, while annual demand grows just 10 million tons, according to Morgan Stanley analyst Devin McDermott.
Chinese LNG demand fell ~20% in 2022 amid strict COVID lockdowns, and even as demand started to recede late last year as China began to reopen, analysts don’t see it returning to previous levels until the end of the year. 2023, with lower cost sources. energy priority, which can limit the specific demand for LNG; Demand may actually slow in India as the energy and industrial sectors switch to cheaper fuels.
The fall in prices will likely hurt earnings for companies in the industry, McDermott said, expecting Cheniere Energy (NYSE:LNG) to earn just $8 billion in EBITDA this year, compared to the Wall Street consensus of $9.8 billion, while New Fortress Energy (NASDAQ:NFE) will likely generate $1.2 billion in EBITDA, versus expectations of $1.8 billion.
Several stocks in the sector are already falling after rising sharply in 2022: Cheniere (LNG) has fallen 6% in the last month. Golar LNG (GLNG) is down 8% and New Fortress (NFE) is down 13%.
Front month February Nymex natural gas (NYSEARCA:UNG) (NG1:COM) closed -7.8% at $3,419/MMBtu this week, for four consecutive weeks and six of the last seven.
Meanwhile, crude oil futures posted their biggest gain in three months this week.
