LNG Spot Price Forecasting and the Futures Curve
LNG spot prices in Asia have defied expectations over the past few years. During 2016 and 2017, LNG markets were widely expected to enter a period of overcapacity, resulting in a long period of low LNG spot prices in Asia. Instead, Asian LNG spot prices increased quickly due to surging demand, particularly in China, and delays in bringing new LNG projects online. In 2018, fears of overcapacity began to recede as LNG prices climbed further, and discussion turned to the potential for a future supply crunch. However, by the time of writing in early April 2019, LNG spot prices in Asia had surprised again, having fallen rapidly to record lows. Against this backdrop, this paper evaluates the accuracy of using the Asian LNG futures price — the current price of LNG for delivery at a specified future date — to forecast the Asian LNG spot price.