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European LNG central to Asian spot pricing

LNG Industry,

The latest analysis from PIRA Energy Group suggests that European liquefied natural gas (LNG) needs are to play a central role in Asian spot pricing this winter. Analysis of natural gas markets fundamentals has revealed the following:

Asian spot pricing

The outlook for having enough spot supply this winter is becoming increasingly reliant on Europe not requiring its contracted LNG to balance, although such an assumption is liable to change with a significant disruption in spot price stability in the global gas trade. PIRA’s 10-day outlook for European daily demand is moving from severely below normal to near normal by the beginning of November. However, the move towards normal seasonal demand is not enough to return contracted LNG to Europe, after it has been used abroad for most of 2013.

Slower storage draws in upcoming winter season

PIRA’s gas balances for the 2013-2014 heating season are looking to anticipate falling prices. Throughout the December to February period, higher year-on-year Henry Hub prices should lead to reductions in gas-fired electric generation. PIRA’s winter balances cause the expected storage deficit at the end of October to make a U-turn to become a year-on-year surplus by the end of Q1 2014 if weather is normal and domestic supply is not seriously disrupted.

Asian demand revised upwards for Q4

PIRA has revised upwards the fourth quarter winter outlook for Asian demand. The slight increase estimates supply additions resulting from a continued flow of diverted and re-exported European cargos meeting higher demand from Korea and China.

Gas in Alberta

Alberta’s Deep Basin has not only revitalised current gas activity levels but also presents considerable future potential. While flat to higher year-on-year prices will limit declines in Alberta’s gas production over the short term, a lack of outlets for new Canadian supply will limit the development of the province’s gas resources for now. PIRA expects to see sustained gas production growth in the province after Canada begins exporting LNG off its west coast.

Edited from various sources by Katie Woodward

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