NYC-based PIRA Energy Group believes that European import flexibility remains central to global LNG supply. In the U.S., the injection was below expectations, but still above normal. In Europe, current length implies lower spot prices ahead.
While a surge in new LNG supply starting in 2015, will be hard to miss, incremental supply availability up until that point will continue to rest on the shoulders of European buyers’ rejected contracted volumes. Two key markets are worth watching for the upcoming winter: while not a major re-exporter, the U.K. market is important because it appears to have the most amount of seasonal swing in LNG buying; the Spanish market is the other key market to watch.
The storage injection in the U.S. reported by the EIA fell a hair below market expectations, breaking the string of outsized increases. Yet, the injection chipped ~24 BCF off the year-on-year storage deficit — the largest weekly decrease in more than a month — and also exceeded the five-year average of 68 BCF by the highest margin this injection season.
The next 60 days offers the lowest gas demand period of the year. This year will be particularly low due to the further erosion of power sector gas demand in most countries other than the U.K. Normally during this period, storage injections would pick up to handle the gas not being consumed. This year spare storage capacity is extremely limited outside of France, as the European gas market enters the third quarter with record high storage levels. PIRA has cut the injection forecast in the third quarter to a mere 203 MMCM/D, which is more than 100 MMCM/D lower than last year.
Press Release, July 9, 2014