PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending July 21st, 2013
New York, NY (PRWEB) July 24, 2013 -- NYC-based PIRA Energy Group reports that spot LNG prices up, but volumes are thin. In the U.S., there is a rapid reduction in the storage deficit. In Europe, there is a revolving door of supply pushing out more LNG and pulling in more pipeline gas.
*Spot Prices Up, but Volumes are Thin
Korea’s most recent import data, coupled with June Kogas sales figures, go a long way towards quantifying just how much unexpected nuclear shortfalls have led to the pumping up of gas demand in a period when gas demand is historically very weak. Coupled with the ongoing issues in Japan and recent unexpected nuclear shortfalls in Taiwan, nuclear power losses in Asia have been a major contribution to current strength in Asian gas markets, beyond the growth economies of India and China.
*Storage Deficit Reduction Slowdown
The dynamics that have taken hold at the onset to the peak months of the cooling season have proved too much to support $4/MMBtu gas prices at Henry Hub (HH). When combined with material production gains in April/May, storage refills have been able to surpass the year-ago figures and allow for a rapid reduction in the storage deficit. Despite our anticipation of more storage deficit reductions in the final two months of the injection season, the pace of reductions should be much slower and in line with the outlook that envisions a progressive lessening of the bearish market sentiment in place since prices peaked in May.
*See the Egress! Europe’s Gas Supply Circus
With the exception of Algerian flows to Italy, more and more pipeline gas is pouring into the European market at the same time that LNG cargos are being sent from European import terminals to destinations all over the world. While this revolving door of supply is odd enough on its own, what makes it even odder is that Europe's storage deficit remains sizable only 3.5 months ahead of injection season. Why exactly Europe would be reloading and diverting LNG cargos when faced with a storage deficit is worthy of additional focus.
NYC-based PIRA Energy Group reports that electricity unvailabilities create short-term price volatility. In the U.S., Eastern Grid/ERCOT market forecast-gas generation loses market share to “All of the Above”. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:
*Unvailabilities Create Short-Term Price Volatility
Continental price developments so far during July continue to mirror a more bullish fundamental picture than in prior months. German demand is looking stronger, while wind and nuclear output has averaged levels below expectations. In line with stronger fossil fuel requirements, another bullish fundamental issue has been the unavailability of coal-fired units. Since the merit order is relatively steep, the changes in these fundamentals will create some further price volatility in the upcoming weeks.
*Eastern Grid/ERCOT Market Forecast-Gas Generation Loses Market Share to “All of the Above”
June spot on-peak power prices were down from May in the Northeast and Midwest, flat in the Southeast, and higher in ERCOT. Price declines along the northern tier of the East grid resulted from a continued easing of gas prices, return of capacity from spring maintenance outages, and relatively mild weather. In the Southeast, increases in cooling loads offset the negative impact of the first two factors noted above while in ERCOT, loads dominated the other two. Loads in the East were down from the prior year. Milder weather in the Midwest was a major factor, but it appears that weather-adjusted loads were also lower. ERCOT loads edged up and weather-adjusted load growth slowed.
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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