PIRA: LNG send-out in Europe not responding to gas shortage

Energy information provider PIRA said that LNG send-out in Europe is not responding to the shortage of gas in storage in many countries. 

According to PIRA’s weekly report, the global surplus in liquefied natural gas will not necessarily lead to Europe being a passive dumping ground for volumes.

European Gas Monthly Forecast

The recent dip in oil prices will work their way into the minds of storage holders; the question at hand will be if importing more during the winter may be less expensive than the carrying cost of importing more now, PIRA said.

If these losses sustain through August, it will make sense for many buyers to cut back on injections in September and October, although the former is much more important from a volume perspective.

The notion of treating imports as a form of just-in-time inventory is not a new concept in Europe, but it is one fraught with risk given the limited number of actual gas suppliers into the system. Here we see strategic and commercial realities at odds, according to PIRA.

Damage Control

Hot weather put a bid under most prices outside of the NE in July. The gains, though, were largely limited to ~15¢ despite new record high daily gas burns that will lead to another large reduction in the year-on-year storage overhang, PIRA reported.

The market’s seeming indifference may be tied to the fact that the seasonal highs for CDDs have now passed. In addition, year-on-year storage surpluses in the U.S. and Canada are now all but assured going into the heating season.

Moreover, if temperatures in August fizzle, downside price risks would expand given the threat of greater storage congestion, namely in the Producing Region. The challenges that region faces stem from supply displacement in the Midwest and Southeast tied to Appalachia production growth, which will intensify.

In addition to lower prices at HH and nearby, stronger Consuming East injections and/or shut-ins could also be needed to balance the U.S. market, PIRA added.


Image: BP