During the last 12 months, several Australian LNG projects started initial production while others cleared major construction milestones. As construction has wound down on the first projects, labor shortages have been eased for those remaining.

While Asian prices have fallen precipitously from the $20 per million British thermal units (MMBtu) mark that many of the Australian projects were predicated on, there has been a slight uptick in the market in both Europe and Asia.

As seen below, Japanese arrival-based spot LNG prices, which had fallen to an all-time low of just over $4/MMBtu in May, have since risen 50%. It does not seem, however, that Australia is completely clear of danger. Several more delays have been announced or speculated on in quick succession in recent weeks.

Most notably, the contractor responsible for building the power station for Inpex’s Ichthys terminal just pulled out of the project without publicly disclosing a reason why. Inpex assured its customers that the contract’s cancellation will not derail the project altogether, but there is little doubt that it will cause yet another delay for the terminal, which was supposed to begin production in July.

This news comes as Shell’s prized Prelude FLNG vessel offshore Northwest Australia is expected to be delayed into 2018, while the following trains at Chevron’s oft-plagued Gorgon LNG are seeing similar delays.

These delays and interruptions have compounding effects on the market. Not only do they remove anticipated supply, but the suppliers that go offline then have to find replacement volumes on the spot market to fulfill their contracts, thereby driving up the price even further.

While there will be a marked oversupply of LNG driven primarily by construction in the U.S. and Australia, that supply is for the most part not yet ready. Therefore, the market is not as liquid as it will be, meaning when supply interruptions or construction delays occur, the prices react to the market’s lack of resilience.

Stratas Advisors recognizes that the expected oversupply is already built into spot prices, artificially lowering them. As these delays and interruptions transpire, there will be a temporary bump in prices that removes some of the anticipated glut’s influence. But as more liquefaction trains actually come online and the oversupply is realized—and the spot market, in turn, becomes more resistant to supply interruptions—those prices will again sink until global LNG demand can catch up.