PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending February 17th 2014

Global LNG Supply to be Extremely Tight in 1Q14, While European Electricity Markets New Compensation Mechanism for Renewable Units are Being Laid Out in Spain

  • Share on TwitterShare on FacebookShare on Google+Share on LinkedInEmail a friend
PIRA Energy Group

PIRA Energy Group

The supply side of the equation is driving extreme tightness in the current 1Q14 market, and current isolated pockets of demand may be driving up spot prices to oil parity levels, although the demand side overall is not exactly robust.

New York, NY (PRWEB) February 20, 2014

NYC-based PIRA Energy Group Reports that the supply side of the equation is driving tightness in the current 1Q14 global LNG market. In North America, Canadian gas price spikes have become a routine occurrence as of lately. In Europe, more and more LNG is being pulled off the market. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

LNG Supply Extremely Tight in 1Q14

The supply side of the equation is driving extreme tightness in the current 1Q14 market, and current isolated pockets of demand may be driving up spot prices to oil parity levels, although the demand side overall is not exactly robust.

Canadian Gas Prices Spiking

Canadian gas price spikes have become a routine occurrence as of lately as fast-declining storage reaches levels that signal the need to ration by price remaining supplies between domestic and U.S. markets. End-March year-on-year Canadian storage deficits will take a heavy toll on exports to the U.S. even if Western Canadian Sedimentary Basin production manages to sustain year-on-year growth. Early 2014 U.S. exports to Mexico remain lackluster but a sizable escalation is forecast post 1Q14. PIRA’s 2020 forecast of U.S LNG exports has been raised despite a mixed bag of issues capable of either speeding up or slowing down progress.

More LNG Pulled Off the Market

More and more LNG is being pulled off the market, but the same cannot be said for Russian gas flows, which continue to show year-on-year growth along the main corridors through Germany, Poland, and Slovakia. Whether this growth is being triggered by aggressive sellers or motivated by buyers nominating in the face of better prices is unclear. Either way, it is having a direct impact on spot prices, which are falling below PIRA's view of the oil-indexed range for the first time in quite a while.

NYC-based PIRA Energy Group reports that a combination of extremely high wind conditions and large hydro availability has led to a severe electricity price crash in the Spanish day-ahead market. In the U.S., the coal market largely moved lower again last week, with the return of throughput from Richards Bay Coal Terminal providing most of the downside. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

New Compensation Mechanism for Renewable Units Being Laid Out in Spain

A combination of extremely high wind conditions and large hydro availability has led to a severe price crash in the Spanish day-ahead market. However, significant regulatory changes are also shaping up in the Spanish market, including a new mechanism that puts renewable output in competition with other technologies in the day-ahead market. The new mechanism of remuneration of renewable units is likely to change profoundly the operational pattern of renewable generation, or even lead to the net loss of renewable capacity.

Return of Richards Bay Coal Terminal Drags Down Coal Prices

The coal market largely moved lower again last week, with the return of throughput from Richards Bay Coal Terminal (RBCT) providing most of the downside. As one would expect, the higher coal supply from RBCT impacted API#4 (South Africa) forwards, especially 2Q14 prices, the most. 2Q14 FOB Newcastle (Australia) prices also fell but to a lesser extent, while API#2 (Northwest Europe) prices increased marginally.

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
212-686-6808
sales(at)pira(dot)com