Plunge in global gas prices is credit positive for Indian consumers: ICRA

The drop in global gas prices augers well for the domestic consumers in the medium-term, according to an ICRA study. Asian spot prices of LNG have declined to about $2/mmbtu owing to increasing supplies and slowing demand on account of the Covid-19 pandemic. About 29 million tonnes of liquefaction capacity was added in CY2019 over 37 million tonnes added in CY2018. Even though LNG trade grew by the highest ever at 40 million tonnes in CY2019, the demand was outpaced by supply, depressing spot prices. Going forward, another 163 million tonnes of LNG capacity is expected to be added over 2020 to 2025 leading to supply outstripping demand which would continue to weigh on prices. Additionally, the covid-19 pandemic is expected to drag the world GDP into 3 percent contraction. The timing of the recovery in the global economy is uncertain and expected to be prolonged, due to which the demand growth of natural gas is expected to remain muted over the medium term, owing to which prices are expected to remain under pressure. Also, crude oil prices have declined precipitously owing to the demand destruction on account of Covid-19 pandemic which would also pressurise LNG prices.

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