PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending May 12th, 2013

New LNG Terminals Offer More Demand, Coal Prices Continue to Drop amongst Weak Global Economic Backdrop

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PIRA Energy Group

PIRA Energy Group

The past six weeks have brought forth a slew of new import terminals around the globe, creating a wider base for the call on supply.

New York, NY (PRWEB) May 15, 2013

NYC-based PIRA Energy Group reports that the past six weeks have brought forth a slew of new LNG import terminals around the globe. In the U.S., the EIA’s gas production estimate for February came in unexpectedly strong. In Spain, the new posting of June pipeline imports from Algeria shows a significant downturn in upcoming June volumes. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

*New LNG Terminals Offer More Demand Options in 2Q/3Q

The past six weeks have brought forth a slew of new import terminals around the globe, creating a wider base for the call on supply. The newly commissioned terminals and expansions in Asia will play a supportive role in offsetting some of the region’s current 2Q/3Q seasonal demand slump as soon as this month. PIRA forecasts that the region could see monthly incremental cargos through the end of the year from these new additions alone, which are located in regions less influenced by the number of heating and cooling degree days.

*EIA Production Surprise

The EIA’s production estimate for February came in unexpectedly strong, leading PIRA to upwardly revise estimates of Lower 48 production going forward. So far in 2Q13, production is tracking slightly above last year’s monthly peak rates in late 2012, owing to robust growth in the Northeast, recovering Rockies output, and slowing Haynesville declines. Higher gas prices clearly have played a role.

*Algerian Pipeline Supply Decreases

In Spain, the new posting of June pipeline imports from Algeria shows a significant downturn in upcoming June volumes. Algerian pipeline flows to Italy have plummeted in recent months and now reside below volumes to Spain for the first time since PIRA started recording data in 2005. Stepping into the Italian breach is Russian supply, which appears to be benefitting from better prices under revised terms to two of Italy's larger importers

*More Canadian Exports Expected

On top of the resurgence in Lower 48 production, net Canadian exports can also be expected to mitigate upward pressure on Henry Hub prices in the months ahead. Weak summer-winter contango will remain a deterrent to filling Canada’s merchant operator-dominated storage, boosting exports to the U.S. in the wake of more resilient Canadian production. Yet, incremental year-on-year exports to Mexico driven by the power sector still stand to inflate the overall U.S. trade deficit.

NYC-based PIRA Energy Group reports that sliding oil prices and ongoing concerns regarding the health of the global economy continue to weigh on the coal market, in addition to weak supply/demand fundamentals. PIRA’s outlook on the U.S. coal market remains mixed. In Europe, the magnitude of the European P.V. installations is likely to face a slowdown. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

*Coal Prices Continue to Drop Amongst Weak Global Economic Backdrop

Coal prices trended lower last week, with 3Q13 prices down for FOB Newcastle (Australia), API#4 (South Africa), and API#2 (Northwest Europe). Sliding oil prices and ongoing concerns regarding the health of the global economy continue to weigh on the coal market, in addition to weak supply/demand fundamentals.

*U.S. Coal Market Forecast

PIRA’s outlook on U.S. coal markets remains mixed with NAPP (Northern Appalachian) and PRB (Powder River Basin) markets firming on tight supply fundamentals, while ILB (Illinois Basin) supply growth is offsetting rising demand. CAPP (Central Appalachian) demand continues to wane in the face of competitive domestic natural gas prices and easing export markets. At current gas price levels both PRB and ILB coals are generally in merit.

*Magnitude of the European P.V. Installations Slowdown Uncertain

There is general agreement in the market place that we are likely to face a slowdown of the P.V. installations over Europe in the two coming years. However, the major uncertainty is the magnitude of such slowdown. The additions forecasted for 2013 and 2014 by a leading P.V. lobbying group are down relative to 2012, but these are still very significant (bearish) numbers from the perspective of the European electricity balances.

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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