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The Liquefied Natural Gas Ltd share price just hit a multi-year low

It was another disappointing day on the market for the Liquefied Natural Gas Ltd (ASX: LNG) share price.

The liquefied natural gas developer’s shares touched on a multi-year low of 41 cents on Wednesday.

Why have its shares been sinking lower?

The oversupply of natural gas has arguably been the biggest reason for the decline.

In its recent annual report management warned that the oversupply of natural gas continues to negatively impact the business and has delayed the signing of offtake agreements.

They went onto explain that as oversupply depresses prices, customers purchase for shorter terms and resist committing to long-term contracts at higher prices that would initiate new capacity construction.

Although LNG demand is growing fast due to being a clean and less expensive alternative to oil and coal consumption, the market is not expected to reach equilibrium until 2022.

Judging by the share price decline, investors appear to be focusing elsewhere because of this.

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Motley Fool contributor Motley Fool Staff has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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