NYC-based PIRA Energy Group reports that the LNG Storage Deficit Shrinks in August. In the U.S., storage is on track to challenge last year’s record high, but plenty of capacity remains available. In Europe, decisions by sellers to market more pipeline gas or by buyers to lift more pipeline gas will have a significant influence on European LNG demand in the months to come, which will have a knock on effect elsewhere in the world.
Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
Another month of intense storage injections in Germany has eased concern about prompt supply risk during the winter, but it has by no means alleviated it altogether. Among the various key countries, the split in strategy that we identified back in the second quarter – some countries building aggressive stocks, while others choose not to do so – remains a key feature through the end of August. Germany has been quite aggressive in its approach to erase its storage deficit, while France has willfully decided to keep buying lower.
Europe’s Choices on LNG Buying
Decisions by sellers to market more pipeline gas or by buyers to lift more pipeline gas will have a significant influence on European LNG demand in the months to come, which will have a knock on effect elsewhere in the world. Over the past few months, Europe’s call on LNG has essentially collapsed due to a combination of seasonal demand losses, underlying demand losses, and a preference for more pipeline gas. Decreases in LNG send out have occurred despite a sizable storage deficit.
More Gas-to-Coal Exposure Ahead
The latest Henry Hub price slump has eased the bearish burden of faster year-on-year storage injections on gas balances. Lower prices have helped gas-fired electric generation retain a larger part of year-earlier gains captured from coal, and the resulting stronger gas demand has recalibrated the market more evenly between bulls and bears, for now. Fundamentals will reflect the interplay between several pivotal demand and supply tendencies. Relatively low CAPP (Central Appalachian) coal prices look poised to make this task more challenging for gas.
[mappress]
LNG World News Staff, September 6, 2013