PIRA Energy: Cool March Weather to Tighten North American Gas Balances

NYC-based PIRA Energy Group said it believes that cool March weather will tighten North American gas balances. In Europe, U.K. LNG stocks are below normal, while Peru’s output looks to be back to normal.

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

Cold Start to March May Cause Year-on Year U.S. Storage Deficit to Increase

The cold start to March increases the odds of the year-on-year U.S. storage deficit surpassing PIRA’s earlier end-March target, reinforcing the SAFTI (supply available for total injections, excluding EG demand) issue. Indeed, U.S. balances should face an “inverted storage box,” where under-utilized storage capacity intensifies competition for supply between storage merchants and gas-fired electricity generators. Given the inventory gap being concentrated in the eastern U.S., HH price support is likely. A large year-on-year storage deficit in western Canada should also buoy prices in the Western U.S.

U.K. Stocks are Below Normal

U.K. stocks are already below normal and limited in size to begin with, so additional draws on these volumes will be bullish, as LNG imports and other pipeline supplies will not come in fast enough to stem potential Norwegian losses. Relying on a single source for a majority of imports during peak demand season can prove risky, especially when factoring in that Norway has multiple markets to serve.

Peru’s Output Looks to be Back to Normal

The exceedingly low-priced contract notwithstanding, Peru LNG itself is emerging as a strong and steady supplier of LNG exports, despite the politically risky climate in which it is operating. Peru looks to be back to normal output after an extensive November maintenance. The plant has been exporting large cargos over the past few months through February.

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LNG World News Staff, March 06, 2013