NYC-based PIRA Energy Group released a new weekly recap saying that PNG volumes offer glimpse of Asian future a different import mix, while U.S. gas prices fell and tensions in Europe support an otherwise bearish market.
What the new PNG supplies will do to the Asia balance this winter is essentially reduce the need for some 9 to 10 cargos per month from farther flung producers in the Atlantic Basin or potentially costlier non-contracted supplies from Qatar to Japan, which holds some 12-mmcm/d of contracts for PNG supply. This shift is a harbinger of an Asian regional reshuffling to come, as more volume from Australia and contracted U.S. capacity potentially reduces the necessity for West African spot volumes and European re-exports.
Last week’s EIA update revealing an 82 BCF week-on-week increase in gas stocks aligned closely with market expectations centered on ~83 BCF — a rare feat this injection season which has seen many outsized market “misses” to the high and low sides. Indeed, today’s report marks only the third time this season the EIA and the market consensus have been within +/- 2 BCF of one another.
“PIRA does see the danger to European gas supply from the current crisis in Ukraine, but until we see an actual disruption or even a significant reduction in flow directly related to the crisis, it is hard to give it more than a cursory weighting for day ahead prices,” says PIRA in its report.
To be clear, this period is not exactly a good time to have a short position in the European spot market. It seems to PIRA that being neutral or long is the most logical place to be, although every bit of commercial reality suggests that the supply/demand balances remain exceedingly bearish. The risk premium is essentially entirely related to the threat of supply loss this winter, as currently, actual supply reductions seem commercially appropriate.
LNG World News Staff, August 14, 2014