PIRA: Global LNG Demand Set to Tumble

PIRA Energy Group said that global LNG demand is set to tumble. In the U.S., Thursday’s EIA report highlighted the market’s continued above-normal reliance on inventories. In Europe, PIRA said it remains relatively unconcerned about a cut-off in gas flows through Ukraine.

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

Global demand is set to tumble starting next month, and weak signals from key counter-seasonal markets like Brazil and India are emerging too. Spot price floors will be kept by a strong round of seasonal maintenance in Qatar in particular.

The Market’s Continued Above-Normal Reliance on Inventories

The EIA reported a withdrawal of 195 BCF in its weekly update, which fell short of consensus estimates straddling 200 BCF. Nonetheless, Thursday’s report highlighted the market’s continued above-normal reliance on inventories, with the stock draw coming in ~50 BCF above the year-ago figure and ~100 BCF more than the five-year average. News of the underwhelming stock change, though, added to losses in place at the opening, with the prompt NYMEX contract initially shedding ~5¢ before ultimately settling at ~$4.38.

PIRA Remains Relatively Unconcerned About a Cut-Off in Gas Flows Through Ukraine

PIRA remains relatively unconcerned about a cut-off in gas flows through Ukraine because it is in neither side’s interest in allowing this to happen. There is even less concerned about a wholesale stoppage of Russian gas exports to Europe, even if some sort of E.U. or German-based sanctions were to emerge. The real concern for Ukraine itself is not now or even 2Q and 3Q, but next winter.

Argentina to Cut Energy Subsidies in Half

Argentina will gradually cut subsidies in half on utilities, Cabinet Chief Jorge Capitanich told the Senate. Argentina’s government will spend 2-2.5% of GDP on subsidies including water, natural gas and electricity. The government currently spends 4-5% percent of GDP on subsidies, paying nearly three times as much to buy natural gas abroad as what it costs to produce domestically.