PIRA Energy Group Reports that the supply side of the equation is driving tightness in the current 1Q14 global LNG market. In North America, Canadian gas price spikes have become a routine occurrence as of lately. In Europe, more and more LNG is being pulled off the market.
Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
LNG Supply Extremely Tight in 1Q14
The supply side of the equation is driving extreme tightness in the current 1Q14 market, and current isolated pockets of demand may be driving up spot prices to oil parity levels, although the demand side overall is not exactly robust.
Canadian Gas Prices Spiking
Canadian gas price spikes have become a routine occurrence as of lately as fast-declining storage reaches levels that signal the need to ration by price remaining supplies between domestic and U.S. markets. End-March year-on-year Canadian storage deficits will take a heavy toll on exports to the U.S. even if Western Canadian
Sedimentary Basin production manages to sustain year-on-year growth. Early 2014 U.S. exports to Mexico remain lackluster but a sizable escalation is forecast post 1Q14. PIRA’s 2020 forecast of U.S LNG exports has been raised despite a mixed bag of issues capable of either speeding up or slowing down progress.
More LNG Pulled Off the Market
More and more LNG is being pulled off the market, but the same cannot be said for Russian gas flows, which continue to show year-on-year growth along the main corridors through Germany, Poland, and Slovakia.
Whether this growth is being triggered by aggressive sellers or motivated by buyers nominating in the face of better prices is unclear. Either way, it is having a direct impact on spot prices, which are falling below PIRA’s view of the oil-indexed range for the first time in quite a while.