PIRA Energy: Tighter Global LNG Supplies to Keep Asian Spot Prices from Normal 2Q Dip

NYC-based PIRA Energy Group believes that tighter global LNG supplies will keep Asian spot prices from their normal second quarter dip. In the U.S., the tightening of gas balances is under way in the months ahead. In Europe, colder-than-normal temperatures will continue to support spot gas prices.

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

Tighter LNG Supplies to Keep Asian Spot Prices from Normal Second Quarter Dip

Tighter LNG supplies will keep Asian spot prices from their normal second quarter dip. Prices will drop from the current peak, but not with the same velocity seen in the past few years. New import terminals in Asia, combined with a tighter supply situation caused by Egyptian and Nigerian reductions, will make LNG supply less expendable.

Gas Balances to Tighten in the Months Ahead

The tightening of gas balances that is under way is largely a result of weather-driven demand gains following a return of more normal weather than seen last year. Not only has residential/commercial, and industrial heating demand swelled, but the positive impact of the colder weather on electric loads has mitigated the detrimental effect of less coal-gas switching in the power sector. Given record-breaking warmth in March 2012, balances should prove to be even tighter next month, as larger year-on-year heating load gains materialize.

Colder-Than-Normal Temperatures to Support Spot Prices

Colder-than-normal temperatures will continue to support spot prices through the end of the month, even though temperatures are not nearly as cold as last year. Year-on-year demand has dropped in February, but the amount of risk associated with finding incremental supply has gone way up. One of the most interesting aspects of the change in supply availability has been the westward flow of Dutch gas into the Belgian market this winter.

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LNG World News Staff, February 27, 2013