NYC-based PIRA Energy Group believes that premium LNG buyers are few and far between in Asia.
In the U.S., gas injections are below expectations, but futures fall while in Europe, fundamentals weaken, place more weight on Ukraine for price support.
While some of the smaller and more remote terminals in Japan and China with limited storage capacity pay premium prices for spot cargos, the high stock situation overall has many buyers sitting back until a demand-driven reason justifies more buying. Throw in a large increase in spot availability from Indonesia over the next 12 months and softer oil prices, and PIRA is left assuming a weaker price outlook even if Japanese nuclear capacity remains offline.
The EIA’s reported 94 BCF storage build for the Reference Week fell modestly below consensus expectations in the vicinity of 96-98 BCF. Comparisons to last year and the five-year average were mixed. The 8 BCF year-on-year increase was the smallest in more than two months, while the 24 BCF gain relative to the five-year average was the second highest since mid-August, finds PIRA.
Spot prices in Europe will remain in a holding pattern at current levels until a Russia/Ukraine deal is officially completed or not completed. Either way, it appears that the uncertainty is the most bullish aspect of the market rather than certainty if the deal will get done. With the potential for a final deal now pushed back another week or more (next stop, Brussels), changing a net position in the market seems risky, but it does appear that the case is building for weaker day-ahead prices.