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Supply drives tightness in global LNG market

LNG Industry,

PIRA Energy Group has reported that the supply side of the equation is driving tightness in the current global LNG market. In North America, Canadian gas price spikes are a common occurrence. In Europe, increasingly more LNG is being taken off the market.

PIRA’s analysis has revealed the following:

Tight LNG supply

Global LNG supply is currently driving extreme tightness in the market during the first quarter of 2014. Current isolated pockets of demand may be driving up spot prices to oil equivalent levels, although the demand side in general is not particularly strong.

Canadian gas price spikes

Canadian gas price spikes have become a regular occurrence recently, as fast-declining storage reaches levels that may force the need to ration by price remaining supplies between domestic and US markets.

Year-on-year Canadian storage deficits to the end of March will have a considerable impact on exports to the US, even if Western Canadian Sedimentary Basin production manages to sustain year-on-year growth.

Early 2014 American exports to Mexico remain limited, however a considerable escalation is forecast beyond the first quarter of the year. PIRA’s 2020 forecast of US LNG exports has been raised, although a number of issues could either speed up or slow down progress.

More LNG taken off the market

Increasingly more LNG is being pulled off the market, although Russian gas flows continue to show year-on-year growth along the main corridors through Germany, Poland, and Slovakia.

PIRA is unsure whether this growth is being triggered by aggressive sellers or motivated by buyers nominating in the face of better prices. Either way, it is having a direct impact on spot prices, which are falling below PIRA's view of the oil-indexed range.

Adapted from press release by Katie Woodward

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