PIRA Energy Group reports that Qatar takes on expiring LNG contracts. In the U.S., the “perfect storm” and its likely lingering impact have justified downward revisions to PIRA’s Reference Case Henry Hub gas prices. In Europe, French storage builds but remains.
Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
PIRA estimates Qatargas has around 25-bcm/yr to market flexibly this year based on existing medium and long term contracts with end users that cannot easily be diverted. Next year, that figure will go up to 29-bcm/yr with the possible expiry of the Repsol contract this December and the June 2014 expiry of the Centrica contract. While this year, and probably well into next year, a good portion of this gas has been sold to Japan on a short-term basis, the imminent restart of at least some of Japan’s nuclear power generation capacity could put the supply powerhouse in a less desirable position, and this is where gas supply issues in Europe (or lack thereof) could re-emerge.
Price Meltdown: A Gas Demand “Perfect Storm”
The current month has kicked off with arguably gas market bulls’ worst nightmare, a combination of bearish storage reports, mild weather, and looming Marcellus/Utica production gains. The consensus weather outlook through late August calls for much below-normal temperatures, magnifying the effects of weak weather-adjusted electric loads, more intense competition from coal, as well as outperformance from renewables. This “perfect storm” and its likely lingering impact have justified downward revisions to PIRA’s Reference Case Henry Hub gas prices.
French Storage Builds, but Remains
The lack of urgency in French storage buying does not seem to be changing in early August. The Montoir LNG terminal actually diverted a cargo via tanker transfer to Argentina, while storage injection rates remain around 50-60-mmcm/d. This rate is not low, but it is also not a level one would associate with trying to make up a sizable storage deficit.