PIRA: Delay in Indian Gas Price Increase Could Have Severe Implications for LNG Demand Growth

PIRA Energy Group says that the potential delay and possible indefinite postponement of an Indian domestic gas price increase could have serious implications for LNG demand growth this year in Asia in general.

Indian Gas Price Increase: Delayed or Indefinite Postponement

The potential delay and possible indefinite postponement of an Indian domestic gas price increase – recently set for April 1 – could have serious implications for LNG demand growth this year and not just in India but also Asia in general.

Withdrawal Above Market Consensus

A relatively stout 57 BCF withdrawal was reported in last week’s EIA update, a figure above market consensus in the low 50s. As well as being ~50 BCF higher than the five-year average, the official pull indicated tighter balances than suggested by comparisons to last week. The NYMEX prompt month’s pop of more than a nickel following the release provided further evidence of the bullish nature of the report. By settlement, the contract more than held its own ramping up to a net gain of almost 18¢ to ~$4.58/MMBtu.

Is Spot Forecast Low Enough

Severely lowering PIRA’s spot price forecast last month was the right move at the right time, but was it lowered enough? At this point, we do not think so due to another month of warmer than normal weather and another expansion of the storage surplus for gas. Current prices along the forward curve reflect a weaker demand for gas from upcoming storage injectors, the power sector, and the R/C sector, with some improvement in the outlook for industrial gas use.

Press Release, April 03, 2014

 

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