It expects 135 million metric tons per year will have been added to global liquefaction supply, a 47% increase, between 2015 and 2020 and that, while new markets for some of this cheap gas are being developed, they are neither sufficiently deep nor being added quickly enough to fully soak up the global oversupply in the next three to five years.

This is at the lower end of the time scale, with many other analysts talking about the oversupply – which could be taken as the point at which LNG is repeatedly sold in a competitive market at a discount to the crude equivalent price – ending not before 2022. 

BOAML says the flexible short-term nature of US LNG exports as well as the US' ability to act as a true swing supplier will help drive this global gas convergence process. With that in mind, it asks: Where are US LNG molecules going? Latin America, especially Mexico, has taken the majority of exports so far but once volumes ramp up, but Europe will have to step up and become the marginal buyer of LNG, it says.

"Seasonality in spot LNG prices may end up being more pronounced. For several years, spot LNG prices faced downside risks in the summer as LNG supply has surged above the market's capacity to absorb it during the weak seasonal demand period. With capacity set to increase, spot LNG prices could continue to experience sharp seasonal price swings. This increased seasonality could trickle through to US natural gas prices as US LNG exports are rising strongly.

"Exports are likely to be higher in the winter than in the summer, making the existing seasonality in the market more prominent. Likewise the UK natural gas market, which is reeling from the shutdown of its largest storage site, Rough, may see more seasonality. In any event, with the potential for lower prices, wider summer-winter spreads and higher volatility, the European gas market could be in for an interesting ride."

William Powell