As much as it has expanded, the LNG market still includes only limited volumes traded on a purely opportunistic basis, which is why downward pressure on prices will be exhibited until summer seasonal demand for cooling begins to pick up in Asia.
New York, NY (PRWEB) June 18, 2014
NYC-based PIRA Energy Group believes that downward pressure on prices will be exhibited until summer seasonal demand for cooling begins to pick up in Asia. In the U.S., last week’s reported storage injection came in below the consensus for the first time in nearly a month. In Europe, balances remain exceedingly loose. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
Downward Pressure on Prices
As much as it has expanded, the LNG market still includes only limited volumes traded on a purely opportunistic basis, which is why downward pressure on prices will be exhibited until summer seasonal demand for cooling begins to pick up in Asia. Japan, at least, is expected to remain nuclear-free through 3Q and will lend some support.
Price Rally Evidence of Latent Upward Market Momentum
Last week’s reported storage injection came in below the consensus for the first time in nearly a month, although still above a year ago and the five-year average. Yet, the market left no doubt on its interpretation of the number. Market expectations called for only a somewhat higher build, but the shortfall relative to consensus stoked a flurry of buying. Within minutes, the nearby NYMEX contract jumped higher by nearly 15¢ and those price pressures dominated throughout the rest of the session. The contract ultimately ended the day at ~$4.76, up ~25¢— the largest daily increase in a prompt month since a gas scarcity-triggered ~60¢ jump in mid-February.
Balances Remain Exceedingly Loose
In this week’s London Seminar presentation, the outlook will focus on the increasing ties that bind European and Asian spot markets, but until we first present the PIRA outlook on Tuesday, another round of Ukrainian high drama must be factored in starting next Monday. In general, the balances remain exceedingly loose, although some supply-side responses did occur over the past week in the form of lower Dutch output and Russian exports. The spot price response was immediate, although far from thoroughly uplifting until Ukraine weighed in with its unilateral threat of a demand cut. PIRA does not, however, see any pullback in LNG send out in the next week, so it will be difficult to achieve any sort of price rally without an actual Ukrainian disruption.
NYC-based PIRA Energy Group reports that French nuclear maintenance costs increase. Seaborne coal prices posted modest gains last week, partially offsetting the sizeable declines in the prior week. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:
French Nuclear Maintenance Costs Increase
While the discussion of the French transition energy law is now in its final stages, new details regarding the past and projected costs of French nuclear are emerging, suggesting even larger capital investments will be needed to maintain the existing fleet. This cost escalation raises further questions on the ability of the French nuclear generator to maintain output at current levels in the upcoming years.
Supply Discipline Scarce in Bloated Seaborne Coal Market
As part of a broader energy complex rally on Friday, seaborne coal prices posted modest gains last week, partially offsetting the sizeable declines in the prior week. For most of the forward curve, API#2 (Northwest Europe) prices gained more ground than API#4 (South Africa) and FOB Newcastle (Australia). Despite this slight rebound, prices remain near multi-year lows, with slack demand (both seasonally and structurally) combining with a lack of supply discipline to keep prices weak.
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.
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