PIRA Releases Weekly Gas Report

NYC-based PIRA Energy Group believes that downward pressure on prices will be exhibited until summer seasonal demand for cooling begins to pick up in Asia. In the U.S., last week’s reported storage injection came in below the consensus for the first time in nearly a month. In Europe, balances remain exceedingly loose.

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

As much as it has expanded, the LNG market still includes only limited volumes traded on a purely opportunistic basis, which is why downward pressure on prices will be exhibited until summer seasonal demand for cooling begins to pick up in Asia. Japan, at least, is expected to remain nuclear-free through 3Q and will lend some support.

Price Rally Evidence of Latent Upward Market Momentum

Last week’s reported storage injection came in below the consensus for the first time in nearly a month, although still above a year ago and the five-year average. Yet, the market left no doubt on its interpretation of the number. Market expectations called for only a somewhat higher build, but the shortfall relative to consensus stoked a flurry of buying. Within minutes, the nearby NYMEX contract jumped higher by nearly 15¢ and those price pressures dominated throughout the rest of the session. The contract ultimately ended the day at ~$4.76, up ~25¢— the largest daily increase in a prompt month since a gas scarcity-triggered ~60¢ jump in mid-February.

Balances Remain Exceedingly Loose

In this week’s London Seminar presentation, the outlook will focus on the increasing ties that bind European and Asian spot markets, but until the presentation of the PIRA outlook, another round of Ukrainian high drama must be factored in. In general, the balances remain exceedingly loose, although some supply-side responses did occur over the past week in the form of lower Dutch output and Russian exports. The spot price response was immediate, although far from thoroughly uplifting until Ukraine weighed in with its unilateral threat of a demand cut. PIRA does not, however, see any pullback in LNG send out in the next week, so it will be difficult to achieve any sort of price rally without an actual Ukrainian disruption.

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Press Release, June 19, 2014