PIRA: Qatari Marketing Flexibility Provides Key Signals for Price Direction

PIRA Energy Group reported that Qatari marketing flexibility provides key signals for price direction. In the U.S., the EIA’s most recent release of 914 Survey data indicated U.S. domestic production reached a new high in July 2013. Actually weak front, potentially strong back define European price schism.

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

Qatar has benefitted financially from placing more LNG into Asia and has managed to do so at a premium to Atlantic Basin spot prices in Asia. To date, Qatar has been able to place incremental volumes into Japan, Korea, and China at, or close to its relatively strong oil-linked prices. How much more gas Qatar can (or will) divert to Asia from Europe this winter is a key question for AB spot players, who have the most to lose if there turns out to be more “wiggle room” on the supply side than anticipated.

2013-2014 U.S. Production Dynamics

The EIA’s most recent release of 914 Survey data indicated U.S. domestic production reached a new high in July 2013. PIRA expects this data point to hold the peak production record for a few months as output since then has been put in check by weather events and slower Marcellus gains. However, an onslaught of new take-away capacity in the northeast during 4Q13 should trigger another surge in Marcellus volumes, helping total U.S. production zoom past the July record.

Actually Weak Front, Potentially Strong Back Define European Price Schism

Day ahead will continue to come under downward pressure from a PIRA 10-day gas demand forecast that is becoming exceptionally warmer than normal. PIRA shows demand dropping to levels that will be 100-mmcm/d below normal starting on Monday, which is about a 13% loss. Forward prices for November and beyond will not be under as much downward pressure as day ahead because the storage deficit remains real and the amount of LNG availability to balance the market in a colder than normal situation remains highly

[mappress]
LNG World News Staff, October 25, 2013