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Home Clean Fuel PIRA Energy: Stronger Asian LNG Demand, but Not Necessarily for Spot Cargos

PIRA Energy: Stronger Asian LNG Demand, but Not Necessarily for Spot Cargos

August 29, 2013

PIRA Energy: Stronger Asian LNG Demand, but Not Necessarily for Spot Cargos

PIRA Energy Group believes that there will be stronger Asian LNG demand, but not necessarily for spot cargos. In the U.S., eastern stocks are expected to be refilled. Europe says “Yes” to Russian gas and “Yes” to profiting from LNG diversions.

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

Stronger Asian LNG Demand, but Not Necessarily for Spot Cargos

In view of slackening spot prices since April – even in the face of unexpected spot supply shortages and a recent heat wave – it is looking increasingly likely that a winter peaking country like Korea, where demand is in fact quite strong, could escape the cold months paying only a moderate premium to Europe to secure incremental volumes. Asian demand is peaking right now, but the added weather stimulus is coming too late in the season to produce a large-scale buying panic in the already tepid market.

Eastern Stocks Expected to be Refilled

Canadian storage deficits have already been substantially reduced except in the east, but we anticipate that eastern stocks will not be entirely refilled since Marcellus gas has become a key source of the region’s supply mix. All in all, U.S. import deficits should narrow in the next two months, but domestic production growth is also forecast to lag last year’s strong sequential gains, keeping overall supply on a fairly even keel year-on-year.

Europe says “Yes” to Russian Gas and “Yes” to Profiting from LNG Diversions

European LNG imports have dropped to a level last seen in 2003 due to a combination of improved prices for contract gas from pipeline sources and sizable arbitrage opportunities in diverting the LNG to markets in South America and Asia. The projected 70-mmcm/d year-on-year drop in LNG imports during August reflects weaker gas demand in Europe due primarily to the obliteration of gas use in power and is secondarily tied to weaker industrial sector demand.

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LNG World News Staff, August 29, 2013