NYC-based PIRA Energy Group believes that big decisions will emerge and change the course of LNG supply in 2015.
Terms such as “postponement”, “cancelation”, and “cost cutting” will feature prominently in the 2015 LNG market. The ability of new LNG supply to move forward on the back of higher oil prices appears to be taking an extended holiday. The upstream and downstream implications will be wide ranging. On the upstream side, PIRA sees a world where announced LNG projects will begin to make official statements that moving ahead will no longer be economical.
Last week’s weekly storage update from the EIA revealed a further contraction in withdrawals — on top of last week’s below-expectation pull. The 26 BCF draw, however, again widely missed the consensus expectations centered in the mid-30 BCF area, notwithstanding some polls pointing to a W/W decline a bit north of 40 BCF.
The lack of persistent colder-than-normal weather is finally paving the way for lower day-ahead and forward prices. The weak supply/demand gas fundamentals PIRA has been discussing for some time, are playing an increasingly central role in price formation. A cold winter forecast by several weather forecast suppliers still makes us somewhat nervous about the longstanding downward trajectory of PIRA’s day-ahead forecast, but the behavior of the forward curve over the past 30 days has been solidly trending towards PIRA’s view. Forward curve prices have already hit PIRA targets to the downside for the first quarter and are moving into close range for the second and third quarters.
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Press Release; Image: Lavaca Bay LNG