RBC Capital predicts that the largest 'tidal wave' of natural gas supply will have a significant impact on global markets.

• RBC Capital Markets stated that the influx of LNG supply is the largest and will have wider implications than previous expansions, transforming the global market.
• Analysts predict that by the end of 2026, there will be an oversupply of expansion, which will last until 2030, and prices may fall below double-digits, according to RBC's Anan Dhanani.

RBC Capital Markets stated that the influx of LNG supply is the largest and will bring about significant and lasting effects on the global market.

The upcoming influx of new LNG supply, which is the largest to date, will significantly alter the global market and have far-reaching consequences, as regional gas markets become increasingly interconnected due to the Russia-Ukraine conflict, according to analysts from the investment bank.

An extended period of oversupply is predicted to occur in the market by the end of 2026 due to supply injection, which may cause prices to fall below double-digits, according to RBC's Anan Dhanani.

On Wednesday, the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas transactions, was trading at $12.78 per mmbtu on the New York Mercantile Exchange.

A growing number of analysts have warned that a combination of weak demand growth and impending export capacity could result in an oversupplied market. With an influx of planned infrastructure, it remains uncertain if demand will rise to meet each wave.

The bearish sentiments in the LNG sector are being driven by an oversupply of LNG and low prices, according to Rystad Energy senior analyst Masanori Odaka. As a result, LNG suppliers are now prioritizing its use for shipping utilization rather than seeking profit margins through arbitrage opportunities.

Simultaneously or sequentially buying and selling commodities across different markets to profit from the price difference is known as commodity arbitrage.

The volume of global LNG trade has increased by approximately 160 metric tonnes over the past decade, from 240 metric tonnes in 2014 to over 400 metric tonnes in the previous year, mainly due to the disruption of Russian pipeline gas to Europe, as stated by RBC Capital. Some investors viewed the geopolitical risk as a profitable opportunity in the market.

RBC predicted that global liquefaction capacity will increase by approximately 50% by the end of the decade, with the U.S. and Qatar remaining the world's largest LNG suppliers, holding a combined market share of nearly 50% in 2030.

RBC's analysts stated that many private companies and state-owned entities plan to increase capacity not only to support European consumption but also to capitalize on the predicted growth in consumption rates, particularly in Asia.

The Asia-Pacific region, the largest importer of LNG, is predicted to increase its demand for LNG by an average of 5% annually. Approximately 70% of this growth will come from China, India, and South Korea.

Despite rising geopolitical tensions, LNG prices have remained stable. Woodside Energy's managing director and CEO, Meg O'Neill, described the market as "remarkably calm."

According to O'Neill, the presence of sufficient supply sources globally could help mitigate any temporary supply disruption resulting from the Middle East. This is likely true for both oil and LNG, as he stated during the Singapore International Energy Week conference.

The International Energy Agency has highlighted the challenges facing the LNG sector, including the upcoming 2024-25 Northern Hemisphere winter and the expiration of existing contracts for Russian gas deliveries to Europe through Ukraine at the end of 2024.

"The IEA stated in a recent note that the halt of piped gas deliveries to Europe from Russia through Ukraine could lead to an increase in LNG imports into Europe, which would result in a tighter global gas balance."