PIRA: LNG supplies grow, spot volumes demand unenthusiastic

NYC-based PIRA Energy Group believes that demand for spot volumes remains tepid amid growing supplies while a modestly higher build was revealed in the U.S., but faster stock deficit reductions ahead.

Accounting for around 61% of all Atlantic Basin spot exports to Asia, Nigeria has the most to lose when the spot market for AB volumes in Asia begins to dry up as it now appears to be doing.

The EIA update on October 16 revealed a 94 BCF build, modestly higher than the 90-91 BCF consensus. The injection chipped another ~2.1 BCF/D (15 BCF) off the year-on-year storage deficit, which was whittled down to 344 BCF. However, the surplus’s rate of decrease has narrowed for the past four weeks to between 1.9 and 2.3 BCF/D. This week’s stock increase was also the closest to the five-year normal (78 BCF) since early May, stands in PIRA’s review.

The combination of weather deviations from normal and an increased possibility of Ukraine and Russia normalizing its gas trade relationship for the winter is a double dose of bearishness for day ahead gas prices in the weeks ahead, PIRA believes.. Hints of an actual deal over the weekend between Russia and Ukraine will have an impact on the entire forward curve, but it is day-ahead prices that are most vulnerable to a downside move in the event of an agreement. European spot prices have been somewhat resistant to decreases in the broader energy complex over the last few weeks because of the sizable risk associated with Russian gas disruptions this winter. That is about to change.

Due to the adjustment made by Mexico’s Energy Regulatory Commission, the price of natural gas supplied to the industrial sector rose on average 6.93% this month compared with September. This is due to the updating of the Adjustment Balance that passed the Energy Regulatory Commission. The largest increase was seen in the city of Minatitlán.

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