PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending December 28th, 2014

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LNG Demand Growth Lags New Supply Increases as Spot Prices Suffer, meanwhile Freight Pricing Outlook Weakens Amidst Worsening Global Economy

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The last best hope for price support — colder than normal weather — has failed to emerge in a sustainable fashion in Asia, Europe or North America for a sustainable period of time, driving down spot prices to all time lows.

NYC-based PIRA Energy Group reports that LNG demand growth lags new supply increases; spot prices suffer. In the U.S., last week's day early holiday reported storage draw was a very long way from a low-to-mid 60s consensus outlook. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

LNG Demand Growth Lags New Supply Increases; Spot Prices Suffer

The last best hope for price support — colder than normal weather — has failed to emerge in a sustainable fashion in Asia, Europe or North America for a sustainable period of time, driving down spot prices to all time lows.

Unchecked Bearish Onslaught

Last week's day early holiday reported storage draw was a very long way from a low-to-mid 60s consensus outlook and the second hard to fathom bearish draw within the month (e.g., week ending 11/28/14). Given ongoing sub-normal heating loads and record high production, the draw stayed anemic relative to the standard targets, a mere ~25% of a year ago (193) and about a third of the 5-year average (138).

Pipeline Service Progress

Current month U.S. gas exports to Mexico have moved only moderately higher after declining in September. The uptick coincides with cross-border and domestic backbone projects that have either partially or fully entered service. Progress on the bidding process for the next phase of pipeline infrastructure, specifically Mexican domestic pipelines targeting domestic connectivity and redundancy, has been moving forward with two of five projects already declaring winners.

NYC-based PIRA Energy Group reports that freight pricing outlook weakens amidst worsening global economy. In the U.S., coal stocks appear to have drawn stronger than the seasonal norm this month. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

Freight Pricing Outlook Weakens Amidst Worsening Global Economy

All hopes of a December rally in Cape freight rates quickly dissolved as rates tumbled down to levels last seen in September 2012. The market has given up on 2014 after a noticeable absence of spot fixtures on the long-haul Brazil to China trade. Pessimism abounds as the global economic outlook worsens. The Chinese economy is slowing down, particularly the steel sector, while the World economy is in a state of flux with big shifts in currency values, an eye-watering drop in oil prices and steep falls in other commodity prices. This will drive structural change in the dry bulk commodity trade and freight markets.

U.S. Coal Stockpile Estimates

U.S. coal stocks appear to have drawn stronger than the seasonal norm this month, in large measure due to continued challenges in PRB delivery. In total, U.S. electric power sector (EPS) coal inventories will reach 129 MMst as of the end of this month or 50 days of forward demand (versus 55 days one year ago).

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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