NYC-based PIRA Energy Group weekly report indicates that India sees a weaker spot market for LNG, U.S., price-induced gas electric generation gains are starting to counter cool weather, while in Europe, power sector gas demand and supply cuts support spot prices.
After steep LNG import declines in India last year and flat growth in 1H, changes to the LNG import outlook may be in the offing in a much more attractive spot price environment. Last month India’s imports saw a relatively major boost of around 7-mmcm/d after declines in the prior 2 months.
Irrespective of the temperature-driven fallout on gas burns, U.S. gas-fired electricity generation has remained weak at the same time U.S. supply growth is surprising to the upside. Such a backdrop has allowed regional prices to march lower in near lockstep with NYMEX futures. Even so, basis differentials outside of the Northeast have not substantively weakened. To the contrary, many points have exhibited relative strength in July. Irrespective of Henry Hub prices, upstream prices in Appalachia will remain decoupled from the benchmark.
The report also shows that structural changes that could lead to an unprecedented increase in the call on U.S. gas supply have become more visible of late. Underpinned by a decisive global competitive price advantage, PIRA foresees a gas-intensive U.S. industrial renaissance, together with LNG exports, cross-border pipeline exports to Mexico and emergence of gas for transportation fuel, contributing to a ~18 BCF/D increase Lower 48 gas production by 2019. North American gas buyers and sellers alike will face unique challenges in the pursuit of opportunities in such a game-changing environment largely underpinned by LNG export projects and the industrial sector, which will be led by the chemical industry. This report highlights recent commitments to support gas-intensive manufacturing that will be heavily concentrated in the U.S. Gulf Coast region.
Press Release, August 7, 2014