PIRA Energy: LNG Supply Shortfall Pushes Asia Spot Price

PIRA Energy Group reported that LNG spot supply shortfall pushed Asia spot price gently. In the U.S., weaker electric generation gas demand indicates a lower price path. In Europe, The facts on the ground do not support a major change in the shape of the forward curve for spot gas.

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

Prices are nudging upwards and the continuation of the Nigeria LNG port blockade means the loss of up to 15 cargos and counting to offer a further boost. The seasonal demand lull is still being felt in Asia, with buyers resisting higher priced spot offers, but the threat of warmer than normal temperatures could change that fairly quickly, particularly on growing spot supply shortages from Nigeria. Oil price strength is a given in the coming weeks, as a resolution to political unrest in Egypt doesn’t appear to be in the near term offing.

Erratic Gas Production Behavior of Late

Beyond last Wednesday’s weekly natural gas storage report, the market remains focused on two components of U.S. gas fundamentals. The prior week’s reported injection underscored a deterioration of gas-fired electric generation relative to our prior forecast. But now, weaker electric generation gas demand indicates a lower price path, and last Wednesday’s results suggest at the least some positive demand impact from the recent gas price downturn. The erratic behavior of recent U.S. gas production is the second market dynamic getting special attention of late.

RWE/Gazprom Ruling is Important but Gas Balances have Evolved

The facts on the ground do not support a major change in the shape of the forward curve for spot gas in face of the recent ruling in favor of RWE versus Gazprom over oil-indexed gas prices. Of course the ruling is highly significant to the balance sheets of many major buyers and to Gazprom, but the price of gas will not be radically altered by this ruling without greater diversification of gas supply.