NYC-based PIRA Energy Group reports that “cheap” LNG does not necessarily drive more LNG consumption.
In the United States, May supply and demand fundamentals have given a preview of the balancing act the market must master in the weeks ahead. Disappointing gas burns in the power sector were offset by production declines in Appalachia and the Gulf Coast. The anticipated trade-off between recovering production and rising power sector gas burns will become increasingly crucial in the weeks ahead. The reason boils down to the need for a more aggressive narrowing of the year-on-year storage surplus in the wake of what is shaping up to be a very modest reduction in the overhang in May.
PIRA notes that Ukraine, the darling of gas bulls last summer did not pan out in terms of a spot price spike, but it is important to remember that it will remain a lingering issue in the months ahead when Russian gas prices will be plummeting further and European buyers will be looking for all types of methods and routes to nominate more Russian gas.