East Coast gas demand

East coast demand

The Beach deal was announced just as Deutsche Bank said the long-feared LNG oversupply next year as propagated by Macquarie and others believe will last until at least 2022, if not longer, may not eventuate.

China's switch from coal to gas to reduce pollution has seen the Asian giant's LNG imports soar by 48% this year, and another larger-than-expected leap in 2018 could wipe out the oversupply forecast for that year, while South Korean demand will also be maintained as it's shifting away from nuclear and restricting coal power.

These Chinese and Korean factors, along with project delays in Australia (Ichthys) and a handful in British Columbia, could bring forward the time when demand starts outstripping supply by about five years.

"We believe this could see 2018 as a transition year for LNG, moving from a buyer's market to a seller's market, potentially bringing forward the commonly accepted 2023-24 inflection point where demand overtakes supply," Deutsche's Sydney-based energy analyst John Hirjee said in a client note.

RBC Capital Markets' Ben Wilson said the scale of the government mandated coal to gas switching has seen demand outstripping supply with suppliers cutting back on gas supplied to industrial customers to meet residential heating demand.

Xinhua reporting implies that Chinese natural gas consumption for November was 23.2 billion cubic metres (about 27.8 billion cubic feet a day), 20% up on the prior period and is still running more than 19% YTD on 2016.

Chinese gas production, which was up a more modest 2% for November at 12.6Bcm (15.2bcf/d), is more than 10% YTD on last year, which Wilson said was a strong run up to the core winter heating months of December-February which over the past few years have been the strongest gas demand months.

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