PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending October 20th, 2013

Qatari Marketing Flexibility Provides Key Signals for Price Direction, While German Renewable Output Will Continue to Grow During 2014

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PIRA Energy Group

PIRA Energy Group

Qatar has benefitted financially from placing more LNG into Asia and has managed to do so at a premium to Atlantic Basin spot prices in Asia.

New York, NY (PRWEB) October 23, 2013

NYC-based PIRA Energy Group reports that Qatari marketing flexibility provides key signals for price direction. In the U.S., the EIA’s most recent release of 914 Survey data indicated U.S. domestic production reached a new high in July 2013. Actually weak front, potentially strong back define European price schism. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

Qatari Marketing Flexibility Provides Key Signals for Price Direction

Qatar has benefitted financially from placing more LNG into Asia and has managed to do so at a premium to Atlantic Basin spot prices in Asia. To date, Qatar has been able to place incremental volumes into Japan, Korea, and China at, or close to its relatively strong oil-linked prices. How much more gas Qatar can (or will) divert to Asia from Europe this winter is a key question for AB spot players, who have the most to lose if there turns out to be more “wiggle room” on the supply side than anticipated.

2013-2014 U.S. Production Dynamics

The EIA’s most recent release of 914 Survey data indicated U.S. domestic production reached a new high in July 2013. PIRA expects this data point to hold the peak production record for a few months as output since then has been put in check by weather events and slower Marcellus gains. However, an onslaught of new take-away capacity in the northeast during 4Q13 should trigger another surge in Marcellus volumes, helping total U.S. production zoom past the July record.

Actually Weak Front, Potentially Strong Back Define European Price Schism

Day ahead will continue to come under downward pressure from a PIRA 10-day gas demand forecast that is becoming exceptionally warmer than normal. PIRA shows demand dropping to levels that will be 100-mmcm/d below normal starting on Monday, which is about a 13% loss. Forward prices for November and beyond will not be under as much downward pressure as day ahead because the storage deficit remains real and the amount of LNG availability to balance the market in a colder than normal situation remains highly

NYC-based PIRA Energy Group reports that German renewable output will continue to grow during 2014. In the U.S., heat fades but markets hang onto gains. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

German Renewable Output Will Continue to Grow during 2014

The report published by the German TSOs detailing the renewable subsidies (EEG surcharge) for 2014 assumes German renewable generation will continue to increase substantially versus 2013. Wind output surprises to the upside (especially during the winter months). Solar generation is set at levels somewhat below expectations, but the explanatory document raises the increasing role of autoconsumption for solar panels. The role of autoconsumption may have contributed to relatively lower than expected solar generation reported so far this year.

Heat Fades but Markets Hang Onto Gains

Spot on-peak power prices in most eastern markets recorded moderate gains in September compared with August as rebounding gas prices countered the impact of seasonal load declines. Exceptions to this pattern occurred at NY-J and the Indiana hub which both saw small declines. ERCOT-S prices were also down, falling by 12% as loads moderated from the seasonal peaks seen in early August. Weather was consistently warmer than normal and warmer than the prior year in the Midcontinent. Despite periods of above normal temperatures further east, most of the eastern seaboard averaged cooler than normal. PIRA estimates that load in the East increased by 2.8% year-over-year while ERCOT loads rose by 6.4%.

1Q14 Coal Pricing Firms on Perceived Supply Tightening

Seaborne coal prices, particularly those in the Atlantic Basin, moved notably higher last week on fears of tightness in 1Q14. API#2 (Northwest Europe) and API#4 (South Africa) prices for 1Q14 delivery increased sharply for the week, while FOB Newcastle (Australia) prices were also up, but muted by comparison. Heightened coal demand during the Northern Hemisphere summer drew on stockpiles more than originally expected, and with Drummond struggling to make up for its nearly two-month labor strike, some coal buyers in Europe may be feeling nervous.

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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