PIRA: LNG storage capacities central to pricing

NYC-based PIRA Energy Group believes that how to store LNG becomes a central issue to the price.

Long LNG market will place more and more of a focus on where storage capacity exists, who owns it, and how much capacity is spare. The U.S. will be a central battleground for future storage valuation, PIRA says in its report.

IN the US, with only eight remaining EIA reports covering the heating season, the window of opportunity to make substantive progress in lessening the storage overhang from above-normal heating loads or weather-interrupted production is closing rapidly. Forecasts for February weather are shaping up to be a letdown for any surge in weather-related demand. Given recent weekly balances, coupled with latest near-term balances, last week’s report includes an update to PIRA’s 2015 Reference Case prices.

In Europe, the entire energy complex said “enough” to the market’s bearish tone over the past week. A bullish rally is not underway, certainly not one based on supply/demand fundamentals, PIRA believes. A central point of focus in the upcoming week needs to be why cuts in Russian gas exports are no longer exclusive to the Ukrainian corridor. The broad-based logic is that Russia continues to cut gas supplies to the market because buyers are keeping nominations low ahead of injection season. The lower nominations are a combination of a desire by buyers/storage holders to withdraw more gas, growing availability of LNG and Norwegian supplies, and the clear outlook that shows the Russian gas that buyers are required to lift in the contract year will be substantially less expensive in the second and third quarter.

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Image: Polskie LNG