PIRA Energy: Global LNG Supply to Tighten

NYC-based PIRA Energy Group believes that LNG supplies could tighten in the months to come. In the U.S., the weekly gas stock draw was larger than expected. In Europe, cold weather boosted demand, while the Algerian situation tightened gas supplies.

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

LNG Supplies Could Tighten

The potential for tighter LNG supplies will be a major theme in the months to come, as the market waits on Angola and Algeria to fire up new production capacity. Existing suppliers in Egypt and Indonesia will also see availability continue to dwindle, with Trinidad threatening to join the list. Throw in official and unofficial disruptions in Yemen and Nigeria last year that are sure to repeat this year, and the result is LNG spot prices that reflect the potential for reduced length relative to the prior two years.

Weekly Gas Stock Draw Larger Than Expected

For the week ending January 11, the EIA reported another gas stock withdrawal that was well above the consensus estimate. The draw pushed the year-on-year storage deficit higher, and underpinned an immediate bullish jump in the nearby NYMEX contract. Temperatures rose nationwide, causing a week-on-week drop in gas-weighted heating degree days, but this was partially offset by a post-holiday rebound in industrial gas demand.

Cold Weather Boosts Demand, While Algerian Situation Tightens Supply

Two bullish items will keep the market firm through the rest of the month. Colder-than-normal weather will propel demand, while supply problems in Algeria will keep supply tighter, with most of the impact likely to be on LNG markets. For now, plunging temperatures forecast for the U.K. are having a greater effect on spot prices than the potential loss of Algerian volumes at the In Amenas area.

[mappress]

LNG World News Staff, January 25, 2013