NYC-based PIRA Energy Group reports that Asian spot prices in the second quarter are once again buckling under pressure from weak global LNG fundamentals.
As a result, the need to optimize every aspect of a company’s LNG assets has never been more important. At the essence of the purchase of the BG Group by Royal Dutch/Shell is the desire to achieve such a goal, with the latter rounding out its portfolio with the assets of the former. BG was heading into difficult territory on several fronts due to the collapse of crude prices, and the lack of an end-user market for the massive amount of LNG equity production and contracted supply on its books. On all these fronts, Shell is well positioned to help itself, PIRA writes in its report.
In the United States, EIA reported a bearish injection of 15 BCF relative to 9-11 BCF general refill expectations. Given the surprise, NYMEX price action was decisively geared to the downside as the contract fell to a new low of ~$2.52 after the release before closing the day at ~$2.53, down ~8¢. The current week’s HH price erosion ahead of last week’s EIA report signaled the market’s earliest physical reality phase. Seasonal heating load losses have begun to underscore the market’s difficult transition to at least partially offset those losses with rising gas-fired EG.
PIRA believes that Europe’s increasingly decisive role in LNG markets this summer will offer a preview of years to come. The unique aspect that Europe plays in the LNG market is that it is just as important for what it does not buy as for what it does due to the surge in re-exporting LNG. At the moment, European send-out from its wide variety of terminals is well down in April versus March for reasons that are not entirely clear. With Norwegian field and processor maintenance starting to shut down and last over the next two weeks, PIRA expects a strong turnaround in LNG flows that will take volumes back near March levels of around 150-mmcm/d.
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Image: Dragon LNG