PIRA: Europe increasing LNG send-out

NYC-based PIRA Energy Group believes that in South America, a fundamental pillar of counter-seasonal demand, the demand run up has started well ahead of the historic peak. 

When April prices receive a bounce towards the end of a lackluster winter buying season, it usually means that counter-seasonal demand is starting to kick in from South America and interest from Mideast buyers is also beginning to emerge. In South America, a fundamental pillar of counter-seasonal demand, the demand run-up has started well ahead of the historic peak, PIRA reports.

In the US, the expected extension of cold weather into March cannot be ignored, but PIRA foresees underlying bearish fundamentals, as reaffirmed in last week’s report, continuing to hold the upper hand against any short-term cold-induced bullishness.

Russia is once again raising the specter that Europe could lose its Russian gas supply indirectly amid its squabble with Ukraine. The problem with this line of reasoning is that Russia would be taking away gas that European buyers do not even want; at least not yet. At the peak of the winter demand period, Russian gas exports have dropped to their lowest level, for any time of year, since 2011. Every indicator suggests that this drop is based on lower nominations by the buyers and not lower exports by the sellers. At the same time, Europe set an all-time monthly record for the second month in a row on storage withdrawals despite warmer-than-normal weather throughout the entire 59-day period. Europe is also increasing its LNG send-out and will continue to do so, as the supply push will grow amid a seasonal collapse in Asian gas demand during the second quarter and new supply availability. The LNG market is undoubtedly long and will remain so through the second quarter, PIRA believes.

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Image: Statoil