PIRA: bargain buying in India offers peek into future spot trade

NYC-based PIRA Energy reported that India’s bargain buying offers peek into future spot trade. In Europe, commercial flows manage to dodge chaos, but risk remains real.

The question of opportunistic buying remains a compelling one in the LNG trade. When it does not occur (China, with one exception, for example) is as interesting and telling about the future of LNG importing as when it does (India). In India, year-on-year growth over the past three months has been very strong and the data suggesting opportunistic buying also brings to bear the notion of a supply push as opposed to an opportunistic demand pull.

No question the bulk of the incremental volumes to India are sourced from Qatar, which has had enormous difficulties placing incremental volumes in other premium-priced Asian markets and to some extent in Europe, where outside of the U.K. and Turkey, Qatari volumes are being re-exported as quickly as they come in.

Commercial Flows Manage to Dodge Chaos, But Risk Remains Real

As expected, day-ahead prices continue to creep higher in Europe, and we expect this trend to continue in the short term. At the same time, winter prices on the forward curve have edged down as they begin to converge with the spot price. This week’s brief disruption of Libyan flows into Italy magnifies what is already a major issue as winter approaches: the disconnection between commercial gas flows and the broader political changes affecting the suppliers of the gas.

India’s Domestic Gas Price Could Depend on Quality

The new price for India’s domestically produced gas is likely to be based on the gross heat value. If it is based on the gross calorific value (GCV), the prices would go up automatically by 10%, which would be advantageous for the producers. “The government wants to ensure that the final pricing mechanism is fair to all — the buyers and the sellers — while not affecting the government’s share of profit,” an official privy to the development said.