PIRA: Asia needs suitable LNG trading hub

NYC-based PIRA Energy Group believes that while downward pressure on European natural gas spot prices will eventually emerge, such a downward move in the weeks to come would mean that supply from several sources is overwhelming the market’s ability to consume it.

PIRA also reports that in North America, U.S. natural gas storage built week-on-week, while in Asia, LNG storage issues moved up on the priority list as supply grows.

PIRA says very little was seen in the way of storage draws this month around Europe, which implies that further cuts in domestic production (Dutch and U.K.) and imports will need to occur if a balance at current prices is to be struck.

The holiday-delayed EIA weekly U.S. storage report that revealed a 40 BCF build topped the consensus by a few BCF while more handedly besting both the year-ago and 5-year average builds. Those bearish comparisons fueled additional NYMEX selling that followed the bullish-to-bearish price reversal that had dominated last week’s trading prior to the storage update.

The quandary regarding the lack of a suitable Asian LNG/gas trading hub is a long standing one and as Asian buyers seek to decouple from oil linkage. It is taking on increasing importance, particularly for Asian and Mideast suppliers with no obvious gas benchmark. Furthermore, as a critical mass of LNG spot transactions migrate to Asia, not just during winter peaking periods but essentially as a year round form of supply, this missing “hub” is becoming increasingly awkward.

Press Release; Image: Gate