North American gas markets face extremely bearish fundamentals, while Japan's increasing gas needs obscure lack of demand in Europe
New York, NY (PRWEB) March 21, 2012
NYC-based PIRA Energy Group believes that North American gas prices continue to be bogged down by weather, sustained production growth, and storage builds. Globally, gas markets have been focused on increased Japanese demand, rather than the lack of demand growth in Europe. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
Rapid Canadian Natural Gas Storage Fills Will Result in Faster Exports During Cooling Season -- The lack of Lower 48 heating degree days threatens to trigger enough gas storage builds to push U.S. natural gas storage to all-time seasonal highs. Canada’s gas storage situation is a smaller-scale mirror image.
U.S. Storage Draw Greater Than Expected -- For the week ending March 9, the EIA announced a larger-than-expected gas storage draw. The April futures contract initially jumped higher on the implied demand strength and/or supply weakness, mostly in relation to the underlying weekly supply-demand models. However, the NYMEX market's inability to sustain the advance underscored the generally bearish sentiment. An already bearish fundamental landscape has turned even more ominous with weather being the main catalyst.
Europe Continues to Lose Unneeded Natural Gas Supply -- Europe continues to lose gas supply it does not need. This will remain the case until some type of gas demand recovery is seen in Europe. The next 45 days mark the steepest period of the year for seasonal gas demand losses, as the heating season gives way to a period prior to the cooling season. While macroeconomic figures do indeed show a bottoming out in broader terms, PIRA sees gas demand lagging the broader recovery due to power-sector specific growth problems.
Japan's Increasing Demand for LNG Overshadows Decreasing Atlantic Basin Demand -- What is more important to spot price formation at the moment: increasing Asian demand or decreasing European and North American demand? By almost all accounts, the former is dominating market moves. With North America unable to export surplus gas and Europe adjusting to life without large amounts of Qatari supply, it is Asia's demand growth that will continue to garner attention, even if it is only pulling gas away from markets that do not really need it.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
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