NYC-based PIRA Energy Group informed that the inefficient mechanisms that pervade LNG pricing, particularly in Asia, were once again highlighted in July.
At this point, the fragmented nature of pricing should not come as a surprise given the even odder behavior of demand. The outlook on the demand front is simply not good, which will do little to boost future support for Asian prices, oil prices notwithstanding, particularly as overall global supply increases are inevitable, PIRA said in its energy market recap.
In the United States, Henry Hub gas prices have taken a sizable hit reflecting the continuing storage surplus coupled with anticipated 4Q production growth led by Appalachia. Sagging prices come despite a late July/early August heat wave and lackluster production which helped boost gas-fired electricity generation, narrowing the storage surplus somewhat faster than earlier expected. Yet, the market’s tepid response to those bullish weather episodes called attention to heightening concerns over bearish gas balances in the months ahead.
LNG did not flow to Europe in the volumes as PIRA expected during the third quarter, with only Qatar really pushing cargos into its own terminals. It is an important lesson for the future; global length does not necessarily mean that Europe will be a dumping ground for LNG in the years ahead, although the emergence of U.S. export volumes could change the equation. Well-priced pipeline supplies from contract sources have stepped in front of LNG to boost storage injections and meet incremental demand.
LNG World News Staff; Image: Tokyo Gas