PIRA Energy: European Colder Weather to Support Higher Spot Gas Prices

PIRA Energy European Colder Weather to Support Higher Gas Spot Prices

PIRA Energy Group believes that European colder-than-normal weather will support higher gas spot prices. In the U.S., PIRA’s analysis points to a stronger risk of lower net gas injections. Important counter seasonal LNG market demand in South America, the Mideast, and Asia.

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

Colder-Than-Normal Weather to Support Higher Spot Prices

Persistent colder-than-normal weather will support higher spot prices over the next 10 days. That is almost a given. But as soon as PIRA’s 10-day daily demand forecast shows a return to normal or even above normal temperatures, the question then becomes what is the justification for day-ahead prices at or above oil-indexed levels? What makes this year different and possibly a creator of a paradigm shift is that the supply situation continues to narrow in terms of accessible options.

PIRA’s Analysis Points to Stronger Risk of Lower Net Injections

PIRA’s analysis points to a stronger risk of lower net injections, and thus, a higher probability of smaller reductions in the year-on-year storage shortfall in April. Even a high demand scenario — lower prices with less year-on-year gas-to-coal switching and higher Residential/Commercial demand from colder weather — would narrow the year-on-year storage deficit by only a nominal amount and would represent no more than ~10% of the forecast end-March deficit.

Important Counter Seasonal Market Demand in South America, The Mideast, & Asia

The last cargos of 1Q13 have just about shipped, so it is time to look ahead to the demand profile of important counter seasonal markets in South America (Argentina, Chile, and Brazil), the Mideast (Kuwait and Dubai), and Asia, namely India and Taiwan. These regions are expected to see an increase in demand in 2Q13 versus 1Q13. To keep things in perspective, this increase contrasts with a drop in winter peaking for Asian demand in Japan and Korea alone.

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LNG World News Staff, April 03, 2013