NYC-based PIRA Energy Group believes that Europe temporarily moves into a central role for global LNG price formation.
It’s still relatively early on in the winter peak, but the near term balances are looking noticeably looser than they did ahead of October, with Asian weather so far offering no support whatsoever on the demand side, though it is starting to emerge in Europe.
PIRA reports that last week’s day early pre-Thanksgiving U.S. storage update reflected a blockbuster draw rarely seen outside peak heating December through February periods. The “consensus” low-150s outlook could be labeled partly misleading given its unusually wide 130s to 160s range that encompassed large support at both ends, together with a standard deviation more than twice the past month’s weekly norm.
PIRA also raises the question how long will day-ahead prices continue to minimize the nature of supply/demand fundamentals? It looks like it could be a while, as the weather outlook is turning colder than normal in some key demand markets. When this turn happens prior to the official start of winter, it can have a magnified influence on prices in the short term. PIRA is comfortable with supply availability for the market, but the forward curve reflects a growing lack of conviction and will continue to evoke a mood where a long position is the safest place to be.
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Press Release; Image: Qatargas