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PIRA weekly gas analysis

LNG Industry,

PIRA Energy Group writes in its weekly report on the week ending 24 August that Asia has room to grow this winter, although this is not for definite. It also noted that in the US, the overweight storage build offset the prior week, and in Europe, Turkey grew, but remains vulnerable to issues in Ukraine.p>

Room to grow

PIRA forecasts that LNG balances are certain to begin to tighten in the months ahead, due to seasonal increases in consumption. The postponement of any nuclear restarts in Japan to Q4 2015 will keep the country's buying pinned to the high side, while increasingly under-utilised import terminals in China offer the potential for an immense swing in spot buying under the right weather or economic conditions. Whether Chinese buyers actually use these new import terminals to a greater extent is another question entirely and will hold the key to whether spot prices will trade at a premium to contract prices this winter.

Overweight storage build offsets prior week

The EIA’s overweight reported injection stands as a counterpoint to last week’s underweight surprise. With market estimates for both weeks centered on the low-to-mid 80s billion ft3 area, each ‘missed’ the consensus by similar margins — but in opposite directions.

Turkey grows but is vulnerable

Turkey is the one market in Europe where gas demand continues to grow. For 9 consecutive months, Turkish gas demand has grown, while no other portion of Europe shows any sign of growth save recent increases in the UK market tied to the loss of coal and nuclear units. Relevant to the current spot market in this regard is that Turkey is buying 26 million m3/day above contract from Russia through its connection via Bulgaria, Romania, and Ukraine, as its other flows through the Black Sea (Bluestream) are nearly full. Therefore, the threat to Turkish supplies is greater than most assume.

Source: PIRA Energy Group

Edited by Ted Monroe

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