PIRA: Broad spot LNG availability persists

July 31, 2014

NYC-based PIRA Energy Group released its weekly report saying that broader spot LNG supply availability persists. Report also shows that U.S. inventories might top 3.5 TCF by end-October while European suppliers respond to weaker market with cuts and India’s Fertilizer producers are looking for lower gas costs.

Almost every major LNG producer in the world is offering third quarter spot cargos, including new producers in Papua New Guinea. The lack of incremental demand for spot LNG speaks volumes about the amount of LNG already under long-term contract compared to previous years.

An underweight 90 BCF storage injection provided the NYMEX gas market with some rare bullish ammunition. The report prompted the nearby contract to add on another 5¢ following modest gains in earlier trading. The up move stalled around resistance at ~$3.85, close to where the nearby contract ultimately settled.

Supply responded to the extensive length in the European gas market in July in the form of greater restraint by marketers in the face of high storage levels and lower seasonal consumption. Along with nascent increases in underlying gas demand for the first time in quite awhile, the spot price support that began to build late in the month was completely justified, although it has its limits to the upside. Spot price support will remain in place in August, as heavier field maintenance will begin in Norway, Asian LNG demand will pick up for seasonal reasons, and Russia will continue to show supply restraint in the face of weaker customer demand.

The Indian Fertilizer Ministry has demanded a near 50% increase in domestic natural gas allocation to urea plants to replace costly imported LNG currently being used as feedstock, which will save INR150-billion ($2.5-billion) in subsidies. As the allocation from domestic fields falls short of requirement, urea manufacturing units are using imported LNG which costs nearly three times the delivered price of domestically produced gas.

Press Release, July 31, 2014