PIRA Energy Group believes that downward pressure on prices will continue until summer seasonal demand for cooling begins to pick up in Asia.
In the US, 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:
Downward pressure on prices
Despite considerable expansion, the LNG market still includes only limited volumes traded on a wholly 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 Q3 and will lend some support.
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. Market expectations called for only a somewhat higher build, but the shortfall relative to consensus resulted in an outbreak of buying.
European/Asian spot markets
In this week’s London Seminar presentation, the outlook will focus on the ties that bind European and Asian spot markets, however the Ukraine situation still has the potential to impact prices.
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.
Adapted from press release by Katie Woodward
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/19062014/pira_lng_price_analysis_800/