PIRA: Potentially Bullish Future Creates Bearish Present in Europe

NYC-based PIRA Energy Group reports that Taiwan joins the nuclear debate. In the U.S., larger-than-expected storage builds continue. In Europe, potentially bullish future creates a bearish present. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

Recent developments in Taiwan’s nuclear power generation arena provide an insight into the wider Asian sentiment post-Fukushima regarding nuclear power. Vis-à-vis nuclear power specifically, the current climate is bullish for natural gas in the long term, despite the fact that in the short term the outlook is noticeably bearish. Another interesting aspect of Taiwanese imports is a slight shift in suppliers away from Qatar and the Atlantic Basin towards Asian sellers.

Larger-than-Expected Storage Builds Continue

The recent string of higher-than-expected storage injections continued into the Reference Week. The EIA’s reported build was modestly above consensus estimates. Flow models, including PIRA’s, generally anticipated a lower build. The reported figure fell below the year-ago injection for the first time since early April, though, and was also close to the five-year average.

Potentially Bullish Future Creates Bearish Present

The broader narrative remains in place: concern about a bullish supply situation next winter is leading to a bearish supply situation in the prompt contracts. Russia’s latest demand for pre-payment of Ukrainian gas in June will only heighten the sense of tension about supply availability next winter. PIRA has laid out the case for some time that LNG imports are the logical choice for cutbacks for two reasons: first, the gas can be sold elsewhere at a higher netback; and second, the gas is typically the highest priced form of supply in a market losing its most price sensitive form of demand (power generation).

[mappress]

Press Release, May 16, 2014