PIRA Energy Group reported that demand for LNG fell from March to April and actual end user gas demand in countries importing LNG falls by even more. In the U.S., while regional gas prices rose month-on-month basis differentials weakened. In Europe, gas demand has dropped to levels not seen since 2002/2003.
Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
Seasonal Demand Losses Mount
Demand for LNG falls from March to April and actual end user gas demand in countries importing LNG falls by even more. A positive month on month change in LNG demand during the shoulder months of the second quarter does not even start until June, which is already well into the counter-seasonal buying period in South America, the Mideast, and Taiwan.
Price Continued to Advance in April, but Regional Gains Fall Short of Henry Hub
While regional prices rose month-on-month, basis differentials weakened in most markets, as the Henry Hub gains proved difficult to fully match. Given the year-on-year storage deficit and unfolding net supply losses. Gas prices must ration supply to ensure storage climbs to adequate levels by end-October. This dynamic creates a mixed backdrop for regional prices going forward.
Will Lower Demand Require Less Storage?
European gas demand has essentially dropped to levels not seen since 2002/2003. Does this mean that storage levels evocative of 2002/2003 will be required to balance the market? Given the tighter budgets and shrinking downstream margins facing many buyers and the eroding gas demand picture outside the residential/commercial sector, the answer to this question will play a significant role in the level of gas buying in the months to come.
LNG World News Staff, May 8, 2013