LNG Is Becoming a Buyer's Market as Oil Drops, Says RBS Sempra

By Ben Farey

Oct. 9 (Bloomberg) -- Liquefied natural gas is becoming a buyer's market as the cost of crude oil slumps and a global recession looms, according to RBS Sempra Commodities LLP.

``We're entering into a new cycle, a buyer's market,'' Stephane Caudron, head of LNG at RBS Sempra Commodities, a trading venture between Royal Bank of Scotland Group Plc and Sempra Energy, said at a conference in Amsterdam today.

There are already ``stranded'' cargoes of the super-cooled fuel that have no destination and were bought when LNG spot prices peaked at about $25 a million British thermal units.

There's a mismatch between sellers' expectations and market prices for LNG, Caudron said in later interview. Sellers were hoping to get $16 or $17 a million Btus for spot LNG cargoes this month and next. ``They won't find buyers for that.''

The world economy is entering a ``brutal'' recession that may depress energy demand, he said. Buyers may have the upper hand for the next few years, the executive predicted. The U.S. gas market is ``loaded'' with domestic production while nuclear power disruptions in Japan, which boosted LNG imports by 8 billion cubic meters to the world's biggest market for the fuel, may soon be solved.


New supplies from delayed production projects in Qatar, the world's biggest producer of the fuel, are expected to reach the market soon, according to Caudron.

Market Turnaround

In the latter part of August and early September, the LNG spot market turned from there being a ``huge appetite'' from the Far East for spare cargoes to one in which traders waited for prices to drop, he said. LNG spot prices are unlikely to exceed the cost of crude oil this winter, Caudron added.

``No Far East buyer is willing to buy a spot cargo now at desperate prices. This time is over,'' he said. Asian stocks of the fuel are high as air-conditioning demand was low during the summer.

``When the U.S. has finished digesting its new domestic production, maybe there will be room for imports again,'' he said.

The U.K. has a ``good chance'' of attracting LNG cargoes in futures markets, he said.

LNG is gas that's cooled to a liquid to aid transportation and storage.

To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net