PIRA: Turkey Looking for More Spot LNG

PIRA Energy Group believes that a progressively weaker yen in December combined with near oil parity spot prices is leading to a stabilization of sorts in Asia spot prices. In the U.S., the frigid weather that has taken hold of both North America along with the 2014 NYMEX gas price curve have outright reversed the gas market’s forward momentum. In Europe, gas shortages in Turkey and parts of Spain are a far cry from the rest of the continent.

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

Progressively Weaker Yen

A progressively weaker yen in December, combined with near oil parity spot prices, is fortifying the stance of Japanese and other Asian utility buyers against any non-essential purchases, leading to a stabilization of sorts in Asia spot prices. Heavier spot buying in the early fourth quarter has led spot prices to where they are today — around $19 per MMBTU according to pricing services — which appears to be the ceiling on what buyers are willing to pay. The price level suggests that burning oil may be a better value compared to these levels. The incentive to buy up February LNG spot cargos at such prices is loosening.

Frigid Weather Reversed Market Momentum

The frigid weather that has taken hold of both North America along with the 2014 NYMEX gas price curve have outright reversed the gas market’s forward momentum. Accumulating losses to gas wellhead freeze-offs, skyrocketing heating loads, and inflated power loads, have set the stage for acute year-on-year storage deficits heading into next year. Aside from the weather, the net trade-off between these conflicting S&D forces will determine how long Henry Hub prices can sustain a “4 handle.”

Gas Shortages in Turkey and Parts of Spain Are a Far Cry from the Rest of the Continent

Gas shortages in Turkey and parts of Spain are a far cry from the rest of the Continent, but it does highlight how countries with a lack of underground storage can occasionally get caught short. Turkey is calling on all sources for more spot LNG, as it appears to have shortages in its residential/commercial and power sectors. While a warming trend is sweeping the rest of the Continent, Turkey is experiencing cold weather and its pipeline sources appear to be unable to provide the balance against demand increases. The impact on European spot prices is largely being felt in LNG markets, where Mediterranean quotes have been put into a rare position of pushing up or supporting spot quotes in Asia. PIRA does not expect to see any impact on European spot prices.

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LNG World News Staff, December 27, 2013