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“Sustained prices at about $5/MMBtu will…further decrease natural gas’s competitiveness against coal in the power stack.”

17 Feb 2014

Commodity Online
Barclays is of the opinion that storage deficit in natural gas, when compared to last year would start narrowing by the end of February even as the temperature by that time, beginning its climb from the second half of the month, would put pressure on the prices.

This is to be read in the context of the visible expectation that “sustained prices at about $5/MMBtu will…further decrease natural gas’s competitiveness against coal in the power stack.”

The week ending February 7 did see the US nat gas stocks dipping by 237 Bcf; 4 Bcf more than widely held expectations. The East was instrumental in taking out 106 Bcf while the west absorbed 42 Bcf. The producing region, meanwhile, shed 89 Bcf.

The storage deficit in the meantime compared to y/y figures stood at 863 Bcf widened by 85 Bcf. It should also be noted that the deficit to the five-year average expanded 75 Bcf to 631 Bcf.

“With only 1.6Tcf of gas in the ground, the current storage level remains below the minimum of the five-year average,” Barclays said in an energy report.

The US Department of Energy (DOE) last week, in the meantime decided to award yet another license for a planned project to transport LNG to non-FTA countries. Cameron LNG’s three trains, having a capacity of 1.7 Bcf/d total, received the nod from DOE for the complete planned capacity. The project may get operational initially in the second half of 2017 and full completion expected by 2018-end.

With 67% of the volume contracted by the Japanese utilities and the rest by GDF Suez, Cameron LNG is fully contracted by LNG buyers.

“In total, the DOE has now approved about 8.7 Bcf/d of LNG exports to non-FTA countries. Since not all of this will materialize by the end of this decade, we believe this is in line with our base case scenario of roughly 8 Bcf/d of LNG export projects coming online by 2020.” Barclays said in the report.

In the meantime well well freeze-offs plagued the production of nat gas even as pipeline flow estimates indicate a figure below the November 2013 average. The majority of freeze-offs are centered in the western as well as southern regions for the time being. North East meanwhile has come back significantly to production activities.

“Barring extreme weather scenarios in March, production should start recovering significantly in the last week of February and into March and April,” Barclays noted.

(Story image courtesy of renjit krishnan/ freedigitalphotos.net)

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