PIRA: LNG Cargoes More of an Option than Necessity

PIRA Energy Group believes that LNG cargoes are more of an option than a necessity. In the U.S., November’s final GWHDD tally soaring above the 10-Year Normal. In Europe, weather-related gas demand and a lack of supply flexibility put a charge into day-ahead prices this week.

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

PIRA’s view on supply availability during an ultra-tight 2013 has been that in most European markets for most of the year, LNG cargoes have been more of an option than a necessity, offering up between three and six cargoes per month in re-exports alone (not including cargoes that are diverted beforehand).

Led by power sector losses, European gas demand has been so poor this year that the cargoes were more valuable on the resale market than for consumption or storage injection in Europe. These “extras” have emerged despite unexpected LNG supply losses from Nigeria, Egypt, and Algeria to the European contract holders.

Charge in Day-Ahead Prices This Week

Weather-related gas demand and a lack of supply flexibility put a charge into day-ahead prices this week, which was in line with the PIRA forecast. Next week and beyond, weather will play a diminished role on most parts of the Continent, but supply constraints of a broad variety are still very much in play. This spot market is not a place to be short, especially if your position is in any way related to the French gas market.

Lack of Nuclear Output Underpins Role of Gas in France and Spain

Day-ahead prices in France and Spain are mirroring the costs tied to the incremental utilization of CCGTs. French and Spanish nuclear generation is heavily down year on year, while a combination of gas pipeline capacity constraints and lack of gas storage have created a surge in gas prices in the PEG SUD hub, with gas prices settling well above contract gas levels and bringing day-ahead power prices up with them.

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LNG World News Staff, December 12, 2013