PIRA Energy Group reports that Asia spot prices stayed put as less liquidity narrows scope of potential buyers. In the U.S., gas fundamentals are far from bullish. In Europe the sizable storage deficit and the threat of higher winter spot gas prices are a cause for concern.
Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
A thinner spot market in 2013 has led to a higher weighted average premium on Asian spot prices over oil-indexed levels. Less liquidity is narrowing the buyers to premium markets, where buyers are either short due to nuclear outages or are backing out oil. The pool of buyers is limited in the mid-$15s with the outlook for contract prices for the next three months below this level. Distressed cargos from Mexico will be in the offing in coming weeks in the wake of a hurricane which destroyed a key LNG off-take line from Manzanillo.
Gas Fundamentals Far From Bullish
Fundamentals favor upside price resistance ahead without the help of below-normal temperatures in the coming months. Higher year-on-year gas prices, along with weak weather-adjusted electricity loads, should lead to gas power sector losses that will offset, if not exceed, projected industrial demand growth. Meanwhile, net trade losses that are set to narrow and accelerating production out of Appalachia should keep U.S. supply well in the black into 2014.
The Sizable Storage Deficit and the Threat of Higher Winter Spot Gas Prices Are a Cause For Concern in Europe
Despite a record rate of gas injections during the third quarter, European stocks are still well below last year and well below normal. However, underlying gas demand continues to recede and if above normal or even normal temperatures transpire this may lead to a decrease in spot prices.
LNG World News Staff, October 02, 2013