PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending March 17, 2013

Atlantic Basin 1Q13 Shortfalls Could Help Stem Asian LNG Spot Price Assessments, while Weakness in International Seaborne Coal Pricing Continues

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PIRA Energy Group

PIRA Energy Group

New, across-the-board supply shortfalls emerging from the Atlantic Basin in 1Q13 could help stem the seasonal drop in Asian spot LNG price assessments, which have been weakening over the past several weeks in anticipation of warmer weather.

New York, NY (PRWEB) March 20, 2013

NYC-based PIRA Energy Group believes that Atlantic Basin 1Q13 shortfalls could help stem the seasonal drop in Asian LNG spot price assessments. In the U.S., gas pipeline access to Southeast electricity generation is increasing. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

*Atlantic Basin 1Q13 Shortfalls Could Help Stem Asian LNG Spot Price Assessments

New, across-the-board supply shortfalls emerging from the Atlantic Basin in 1Q13 could help stem the seasonal drop in Asian spot LNG price assessments, which have been weakening over the past several weeks in anticipation of warmer weather. At the same time, European spot prices have been strengthening, which will temporarily bring high spot flows to Europe back into play for struggling Atlantic Basin producers.

*Access to Southeast Electric Generation Increasing

PIRA’s Reference Case foresees the U.S. Southeast gas demand besting growth in all other major regional markets. Overall, there are 12 pipeline projects scheduled to be in service before 2018. Nearly all projects target electricity power market growth, and PIRA expects most, if not all, will be built.

NYC-based PIRA Energy Group reports that weakness in international seaborne coal pricing continued last week. In the U.S., spot on-peak power prices were mixed in the Eastern Interconnect. In Europe, electricity gas units are at risk of closure, but are still needed for system stability. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

*Continued Weakness in Coal Pricing

Despite a slight rebound on Friday, international seaborne coal prices faded again last week, with API#2 (Northwest Europe) exhibiting the largest week-on-week decline. The return of Colombian coal supply (although not fully due to an attack by FARC on Cerrejón’s rail facilities) and China’s sluggish return to coal buying after the Lunar New Year has depressed pricing, and the market is searching for a bottom.

*Spot On-Peak Power Prices Mixed in Eastern Interconnect

Spot on-peak power prices were mixed in the Eastern Interconnect this February compared with January. In the Northeast, power followed gas to even loftier levels while prices were flat in the Southeast (supported by higher loads) and down in the Midwest and South Central subregions. PIRA estimates that overall electricity demand in the Eastern Interconnect increased year-on-year for February, and generation rose from the prior year.

*Gas Units at Risk of Closure, yet Still Needed

Major power generators are pointing to risks of growing oversupply in the years ahead, with further retirements of fossil fuel plants likely to be announced as a result of deteriorating margins. However, according to the data collected by the German energy regulator, firm plant retirements are fairly small relative to the new coal and renewable capacity that is being brought online. While gas plants are barely profitable, they are needed for the stability of the system.

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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