How the Pandemic has Led to an Unusual Glut in the LNG Market

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Shipowners and traders of liquefied natural gas (LNG) say the COVID-19 pandemic has forced them to rapidly adjust their businesses. 

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With some choosing to scrap vessels and others delaying new buildings as they contend with a plunge in demand for the super-chilled fuel.

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The fall in global LNG trade has been stark. Exports from Qatar, the world’s top supplier.

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This were down 13% in 2020 compared with the previous year, according to energy consultancy Wood Mackenzie.

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South Korea, the second-biggest buyer, imported 19% less LNG last year. Japan, the largest market, saw a drop of 8%.

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The pandemic has slashed gas demand in many parts of the world as factories closed and people stayed home. 

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It has also hit oil prices, which have a big influence on LNG because the fuel is often linked to crude benchmarks in long-term contracts.

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That has led to a glut of LNG and depressed prices for the commodity, making it uneconomic for some producers to keep selling.

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Some shipowners have sought to take advantage of the low prices and high availability of the fuel by quickly converting oil tankers into LNG carriers. 

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A process that can take as little as six weeks.

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