PIRA Energy Group reports that as Asian LNG spot prices come down, opportunities are going up for flexible buyers. In North America, Canadian exports will play a vital role in determining gas supply available for U.S. storage refills in the months ahead. In Europe, Russian gas marketers are quietly selling more gas to Europe than ever before.
As Asian spot prices come down, opportunities are going up for flexible buyers including those with available storage in Asia and elsewhere. Unfortunately for the biggest buyers in Asia, who to date have been paying the highest spot prices, Japan and Korea’s lack of available storage is impinging on the ability to take advantage of more attractively priced cargos in May and June. This minimal interest, in turn, is pushing spot prices even lower out through the end of 2Q14.
Canadian Injection-Season Exports Face Serious Downside Risks
Canadian exports will play a vital role in determining gas supply available for U.S. storage refills in the months ahead. Total Canadian storage plummeted to a year-on-year deficit at end-March. By end-October, eastern Canadian inventories are virtually assured of recovering to near recent norms given the dominance of utilities in the region, but PIRA’s Reference Case assumes a gaping hole will remain in western Canada where a very high percentage of storage is merchant-owned. This latter assumption exposes Canadian exports to serious downside risks that could be further undermined by NEB regulatory actions in response to pipeline safety concerns in Alberta.
Russian Gas Marketers Quietly Sell More Gas to Europe
It is in the interest of none of the main players for gas supply to be disrupted in any way; not Russia, not Ukraine, and certainly not the E.U. The kicking down the road of the gas debt issue to next month confirms PIRA’s belief that it is largely a tempest in a teapot. What’s largely being missed here in the political maelstrom is that Russian gas marketers are quietly selling more gas to Europe than ever before and at a price that will meet or surpass their revenue targets for 2014.