PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending July 27th 2014
New York, NY (PRWEB) July 30, 2014 -- NYC-based PIRA Energy Group reports broader spot LNG supply availability persists. In the U.S., An underweight 90 BCF storage injection provided the NYMEX gas market with some rare bullish ammunition. In Europe, suppliers respond with cuts to weaker European market. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
Broader Spot LNG Supply Availability Persists
Almost every major LNG producer in the world is offering third quarter spot cargos, including new producers in Papua New Guinea. The lack of incremental demand for spot LNG speaks volumes about the amount of LNG already under long-term contract compared to previous years.
Despite Bearish EIA Report, U.S. Inventories to Top 3.5 TCF by End-October
An underweight 90 BCF storage injection provided the NYMEX gas market with some rare bullish ammunition. The report prompted the nearby contract to add on another 5¢ following modest gains in earlier trading. The up move stalled around resistance at ~$3.85, close to where the nearby contract ultimately settled.
Suppliers Respond with Cuts to Weaker European Market
Supply responded to the extensive length in the European gas market in July in the form of greater restraint by marketers in the face of high storage levels and lower seasonal consumption. Along with nascent increases in underlying gas demand for the first time in quite awhile, the spot price support that began to build late in the month was completely justified, although it has its limits to the upside. Spot price support will remain in place in August, as heavier field maintenance will begin in Norway, Asian LNG demand will pick up for seasonal reasons, and Russia will continue to show supply restraint in the face of weaker customer demand.
India’s Fertilizer Producers in Need of Lower Cost Gas
The Indian Fertilizer Ministry has demanded a near 50% increase in domestic natural gas allocation to urea plants to replace costly imported LNG currently being used as feedstock, which will save INR150-billion ($2.5-billion) in subsidies. As the allocation from domestic fields falls short of requirement, urea manufacturing units are using imported LNG which costs nearly three times the delivered price of domestically produced gas.
NYC-based PIRA Energy Group believes that German power prices mirroring more volatile fuel pricing complex. In the U.S., coal inventory draws have seen a reprieve as mild July weather conditions across much of the east and subsequently softer natural gas prices have been supportive of stock levels. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:
German Power Prices Mirroring More Volatile Fuel Pricing Complex
German forward power prices have surged over the past week or so, with marginal costs for coal-fired generation being underpinned by stronger EUA prices and euro-denominated API#2 coal prices, mostly reflecting geo-political concerns. While the Ukraine crisis starts to impact German power more visibly, so far the balances remain broadly unchanged, with only the short-term picture appearing less bearish than earlier this month.
U.S. Coal Stockpile Estimates
Coal inventory draws have seen a reprieve as mild July weather conditions across much of the east and subsequently softer natural gas (NG) prices have been supportive of stock levels. PIRA places U.S. electric power sector (EPS) coal inventories at 120 MMst as of the end of this month or 49 days of forward demand (versus 63 days one year ago).
Russian Supply Risks Drive Atlantic Basin Pricing Higher
Coal prices rebounded notably last week, particularly in the Atlantic Basin, with 3Q14 API#2 (Northwest Europe) prices exhibiting the greatest resilience. API#4 (South Africa) and FOB Newcastle (Australia) prices also moved higher, but to a lesser degree than API#2. In the wake of the most recent escalation of tensions in Ukraine/Russia, European natural gas prices have risen notably, and rumors that Russian exports will not be allowed into Europe due to potential sanctions boosted pricing.
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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