PIRA: Lack of Spot LNG Consumption in Asian Markets

NYC-based PIRA Energy Group reports that a significant surge in the amount of LNG being sold under long-term contract in 2014 is limiting the diet for spot LNG in Asian markets.

In the U.S., the EIA reported the season’s first “true” triple-digit storage injection. In Europe, PIRA is under no illusion that the prices being reported in the Russian and Chinese press will actually be the prices once the infrastructural is built.

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

Lack of Spot Consumption

A significant surge in the amount of LNG being sold under long-term contract in 2014 is limiting the diet for spot LNG in Asian markets. The lack of spot consumption will be particularly acute between now and the end of July due to seasonal decreases in demand.

Triple-Digit Storage Injection

The EIA reported the season’s first “true” triple-digit storage injection today, following last week’s 97 BCF refill adjusted for the reclassification. The indicated 106 BCF build topped the year-ago and five-year average, both of which are 90 BCF. Though the build was only 2-3 BCF above consensus, the news produced an outsized negative response in the nearby NYMEX contract. June futures contract shed more than a dime in its initial move before treading even lower and settling at – $4.36, down – 11¢ day-on-day.

Russia to China, Moving Forward

PIRA is under no illusion that the prices being reported in the Russian and Chinese press will actually be the prices once the infrastructural is built. State to state deals have a long and sordid history of being signed at price X, built at price Y, and commissioned at price Z. The key aspect of this deal was to kick start the building of the infrastructure in a world where a limited amount of capital will be in continuous competition with the immense capital and credit requirements needed to build all the pipelines, tankers, LNG facilities, and shale infrastructure the world will need over the next 20 years. The deal also provides economic support within Russia for industries facing a longer list of sanctions abroad.