PIRA Energy Group’s Weekly Global Natural Gas Market Update for the Week Ending May 13

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Canadian natural gas exports to the U.S. are set to rise in 2012, as corporate changes at E.ON effect European gas markets, and LNG supply concerns begin to surface.

PIRA Energy Group
Additional increases in Canadian exports to the U.S. seem almost assured in 2Q12, given the lack of progress in reducing the Canadian storage surplus.

NYC-based PIRA Energy Group reports that natural gas exports from Canada to the U.S are likely to increase year-on-year unless Canadian balances tighten. In Europe, changes at E.ON could reshape gas markets. In the LNG market, sabotage in Yemen is bringing supply concerns to the forefront. Specifically, PIRA’s analysis of global natural gas market fundamentals has revealed the following:

Canadian Gas Exports to U.S. Set to Increase Year-on-Year.
In April, U.S. gas imports from Canada increased slightly month-on-month, despite seasonally weaker demand. Imports were lower year-on-year, but the year-on-year deficit narrowed from March. Additional increases in Canadian exports to the U.S. seem almost assured in 2Q12, given the lack of progress in reducing the Canadian storage surplus. With five months of the injection season to go and limited storage space remaining, exports to the U.S. are set to rise year-on-year unless Canadian balances tighten significantly. The recent price rebound makes such tightening less likely.

U.S. Nat Gas Stock Build Again Lower than Expected.
For the week ending May 4, another below-normal storage build was reported by the EIA. The reported injection fell short of the year-ago and the five-year average build for this week. Supply increased week-on-week, on moderately higher domestic production and a gain in net trade. Demand was essentially flat as seasonally declining heating demand was matched by rising electricity generation needs. While gas-weighted heating degree days and residential/commercial heating loads declined, cooling demand strengthened. In particular, gas consumption for electricity generation in southern states jumped.

Corporate Changes At E.ON Have Potential to Reshape Gas Markets.
While PIRA typically focuses on the gas commodity itself, it would be remiss not to analyze the potential consequences of the seismic changes at E.ON. As one of the largest and most influential gas buyers in Europe, the decision by shareholders to no longer be a German utility (A.G.) and become a broader EU-based Societas Europaea (S.E.) will affect the gas markets, and specifically storage levels. E.ON is on the verge of selling its substantial gas transmission system, which could change the course of European gas pricing, if completed.

Global LNG Supply Concerns Surface on Continued Yemeni Sabotage.
It appears LNG supply concerns have resurfaced with the key supplier to Boston's Everett terminal declaring force majeure on two cargos in the coming months. Boston-area power consumers could feel the pinch until alternate supplies can be secured. However, the biggest potential problems will be for Korean winter buyers in the months to come if Yemeni sabotage continues to curb flows through the end of the year.

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.

Click here For Additional Information on PIRA’s global energy commodity market research services.

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