PIRA: Asian Near Term Spot Demand Climate Looking Bearish

January 15, 2014

PIRA Energy Group believes Asian near term spot demand climate is looking bearish. In the U.S., EIA changes its methodology for assessing associated gas production. In Europe, the peak period is upon us for seasonal gas demand over the next four weeks in a normal weather environment.

Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

Asian Near Term Spot Demand Climate Looking Bearish

In Asia, near term spot demand is looking much more bearish over the balance of 1Q14 and beyond owing to the nascent return to normal operation of Korea’s 23 scandal-plagued nuclear power units. PIRA forecasts a 9-mmcm/d year-on-year average drop in gas demand for power generation through June. This is the equivalent of some 3 standard cargos per month, and the forecasted decrease is on the conservative side.

EIA Changes Methodology for Assessing Associated Gas Production

Prior to 2012, EIA estimates of gas production from oil and gas wells were based on well classifications made by each individual state. For the 2012 Natural Gas Annual, however, the EIA instituted a new overarching method for defining oil and gas wells that replaces state-published well classifications. Consequently, EIA associated gas estimates now stray significantly from those based on state agency data. PIRA will continue to use state well classifications as they tend to be more indicative of revenue-based drilling criteria, and provide for more consistent year-on-year comparisons.

Peak Period Is Upon Us for Seasonal Gas Demand in Europe

The peak period is upon us for seasonal gas demand in Europe over the next four weeks in a normal weather environment. With the weather turning colder than normal in the U.K. (sustained) and German (temporarily) portions of the 10-day daily demand outlook, the end of the brief “being short” period appears to be just ahead of us in day ahead trading. So just as quickly as supply needed to be removed from the market – cuts emerged in LNG send out, Norwegian exports, and Dutch production – it will need to be ramped up once again if temperatures stay lower than normal.

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LNG World News Staff, January 15, 2014