PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending May 19th, 2013

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Industrial Gas Consumers Continue to Feel the Pain, while Persistent Oversupply in Coal Market Drives Prices Lower

PIRA Energy Group

PIRA Energy Group

PIRA expects an increase in Russian gas purchases by European buyers in the months ahead.

NYC-based PIRA Energy Group reports that industrials continued to feel the pain of high priced regional natural gas. In the U.S., PIRA’s producer survey corroborates a downtrend in gas output. In Europe, Russian gas exports shift around. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

  •     Industrials Continue to Feel the Pain of High Priced Regional Natural Gas

India's fertilizer companies have been quoted prices 50% higher than the price at which the government subsidy is capped whilst a key Australian Industrial has elected to invest away from its homeland hoping to stem falling profits. Meanwhile gas-rich conglomerates are looking to buy up mothballed assets in a quest to find a home for gas currently deemed too expensive.

  •     Producer Survey Corroborates Downtrend in U.S. Gas Output

Results of PIRA’s 1Q13 Producer Survey corroborated the quarter-on-quarter downtrend in U.S. gas output in 1Q13. The Survey again highlighted that gas market signals in the form of low prices had not fallen on deaf ears for the large majority of companies as of 1Q13, at least, with more than 70% of companies reporting lower gas production than the prior quarter. That said, some players in still growing shale plays — the Marcellus in particular — had an outsized impact on buoying overall output.

  •     Russian Gas Exports Shift Around

PIRA expects an increase in Russian gas purchases by European buyers in the months ahead. Right now there is a major increase in Russian gas flows via Ukraine towards Baumgarten with most of this gas going on to Italy, where Russian imports are up year-on-year over the same period. Meanwhile, on the Czech border at Lanzhot, there is an immense year-on-year decrease in Russian flows during 2Q13.

NYC-based PIRA Energy Group reports that persistent oversupply in the coal market led prices lower. In the U.S., April electricity loads in the East increased from the prior year. In Europe, French power prices moved lower. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

  •     Persistent Oversupply in Coal Market Drives Prices Lower

Coal prices largely moved lower last week, with API#2 (Northwest Europe) again exhibiting the largest losses. 3Q13 prices declined for both API#2 and API#4 (South Africa), however FOB Newcastle (Australia) prices increased slightly as threats of intensifying strikes by port employees at PWCS (Port Waratah Coal Services) may cause some tightening in the Pacific.

  •     Loads in the East in April Increased From Prior Year

April loads in the East increased from the prior year as increased heating requirements in the North Central region more than offset lower cooling loads in the South. With the exception of the Northeast, on-peak power prices rose from March supported by higher natural gas prices and seasonal maintenance outages. Coal unit margins (dark spreads) continued to benefit from this year’s recovery in gas prices, with coal-fired generation increasing from the prior year.

  •     French Prices Move Lower

French year-ahead power prices are trading below the level at which French nuclear power is sold to EDF competitors. This is a key milestone and it hints at the possibility that a war for market share or total sales may have started to emerge among main power companies. So far during May, French net exports have greatly increased, moving to a 5-year high, while fossil fuel requirements across Western Europe are estimated to be at a historical minimum.

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.

PIRA Energy Group
3 Park Avenue, 26th Floor
New York, NY 10016
212-542-1677
info(at)pira(dot)com

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