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Asia LNG prices plummet to record lows as China shuts down

|About: Royal Dutch Shell plc (RDS.A)| By , SA News Editor

Liquefied natural gas is selling at the lowest price on record in Asia, a troubling sign for U.S. energy producers who have relied on overseas shipments of shale gas amid a weak domestic market.

Asian LNG prices fell to $3/MMBtu today, plunging from above $5/MMBtu as recently as Jan. 15, as a glut in the commodity spreads from the U.S. all over the globe.

“The fundamentals were already really weak” even before the coronavirus outbreak stalled economic activity in China, says Ira Joseph, head of gas and power analytics at S&P Global Platts. “The whole market is really oversupplied.”

That’s bad news for a wide range of energy firms, from big oil names like Shell (RDS.A, RDS.B) and Chevron (NYSE:CVX), to independent firms that operate export terminals such as Chienere Energy (NYSEMKT:LNG), to shale gas producers such as Range Resources (NYSE:RRC), Cabot Oil & Gas (NYSE:COG) and EQT Corp. (NYSE:EQT)

In the U.S., natural gas prices tumbled below $2/MMBtu last month and have remained there, a remarkable drop given that prices for the heating fuel typically are at their highest levels in winter.

March nat gas futures closed today at $1.862/MMbtu, down 30% from a year ago despite record consumption by U.S. power plants and a surge in exports, both seaborne and across the southern border into Mexico via pipelines.

At prices below $2.25, producers likely will idle drilling rigs and cut production, Bernstein analysts say. “We anticipate this will happen over the coming weeks, which should provide some support to [H2 2020] prices.”

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