NYC-based PIRA Energy Group believes that drought-stricken Brazil will continue with high LNG imports, while in the U.S., there was another above-expectations build, with larger injections to come. In Europe, Ukraine data implies another storage boost in 3Q.
As it heads into its traditionally weaker season for gas demand, Brazil will nevertheless be testing the limits of how much LNG it can import. Hydro storage levels in Brazil are well below the 10-year range and more gas is going to be needed in order to keep the lights on, the people cool, and the factories operating.
For the second consecutive week, EIA’s reported build was 5-7 BCF above the market’s expectations and even exceeded the high end of a relatively wide range of estimates. Again, the Producing Region proved the most dynamic, doubling its injections week-on-week to 20 BCF.
If new official Ukrainian data is to be trusted, PIRA now estimates that storage levels in the country began the month of Sept. at 19-bcm. This level is based on actual data through July and an assumption that August injections (2.5-bcm) were less than July injections (3.6-bcm). At 19-bcm, PIRA data shows that Ukrainian gas imports can be covered by storage through the first week of February assuming normal weather and Oct. 1 as the beginning of the withdrawal season. Assuming colder than normal weather for the entire stretch, storage would be compromised by the first week of January.
Press Release, September 18, 2014; Image: Teekay