PIRA Energy Group has noted that Europe is increasing its LNG send-out, as the supply push continues to grow amid a seasonal collapse in Asian gas demand and new supply availability.
Russia is again raising the question that Europe could lose its supply of Russian gas indirectly as a result of the Ukraine situation. However, the problem with this line of reasoning is that Russia will be taking gas away from European buyers who do not actually want the source.
At the height of the winter demand period, Russian gas exports have dropped to their lowest level since 2011. This drop is based on lower nominations by the buyers (i.e. Europe), not lower exports by the sellers (i.e. Russia).
At the same time, Europe set an all-time monthly record for the second month in a row on storage withdrawals, despite warmer than usual weather. The region is also increasing its LNG send-out and will continue to do so. PIRA forecasts a long LNG market that will remain through the second quarter of 2015.
PIRA believes that in South America, a fundamental pillar of counter seasonal demand, the demand run up has started well ahead of the historic peak. When April prices receive a boost towards the end of a quiet winter buying season, it usually means that counter seasonal demand is starting to filter in from South America.
In the US, the expected continuation of cold weather into March should be taken into account. However, PIRA anticipates underlying bearish fundamentals, continuing to hold the upper hand against any short-term cold-induced bullishness.
Adapted from press release by Katie Woodward
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