PIRA Energy: Mideast LNG Buying Season Begins Just as Asian Market Softens

PIRA Energy Group reports that gas storage issues in Europe are becoming the driving force in European spot gas market direction. In LNG markets, the Mideast buying season begins this month, just as the Asian market softens.

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

Europe Gas Storage Issues Take Center Stage

Weather deviations from normal are being rapidly replaced by storage injection deviations from normal as the driving force in spot market direction. Now that weather-based demand – as seen in the PIRA 10-day daily demand outlook – is teetering between normal and below normal, day-ahead prices are receding back to pre-winter levels, where the mid-60s are considered a high price and the mid-50s are considered a low one. A key point of emphasis bears repeating: higher-than-normal demand for storage injections has never been a historical price support mechanism for day-ahead prices.

Mideast LNG Buying Season Begins Just as Asian Market Softens

Maintenance season in the Middle East starts this month and will pull some 1.6-bcm off the market over the next two months (around 20 cargos). Added to that is the beginning of seasonal imports to the region in Kuwait and Dubai (not to mention Israel), which will further impinge on net cargo flows out of the region. Kuwait and Dubai together sourced around 42 cargos from Qatar last year in the March to October period and it is looking like import levels in 2013 will be about the same, depending on the weather.

New Pipelines for New England?

Despite the ongoing massive increase in nearby Marcellus supply, New England markets have long been located at the “end of the pipe.” The combination of recent colder-than-normal weather, uncompetitive LNG imports, and increasing supply concerns surrounding both Sable Island and Deep Panuke should result in sharply higher NYMEX Algonquin Gas Transmission citygate basis premiums through 2015. However, such basis strength is likely increasing the attractiveness of new pipeline capacity projects.

[mappress]
LNG World News Staff, April 17, 2013