PIRA Energy weekly report

PIRA Energy Group's Weekly Natural Gas, Power and Coal Market Recap for the Week Ending April 20th 2014As Asian LNG spot prices decrease, flexible buyer opportunities increase; meanwhile in spite of a generally residual role in European electricity power, exposure to Russian gas is diverse among power markets.

PIRA Energy Group reported that opportunities are going up for flexible buyers as Asian LNG spot prices come down. In North America, Canadian exports will play a vital role in determining gas supply available for US storage refills in the months ahead. In Europe, Russian gas marketers are quietly selling more gas to Europe than ever before.

Spot prices fall, opportunities increase

As Asian spot prices come down, opportunities are going up for flexible buyers including those with available storage in Asia and elsewhere. Unfortunately for the biggest buyers in Asia, who to date have been paying the highest spot prices, Japan and Korea's lack of available storage is impinging on their ability to take advantage (more details in the upcoming Global LNG Monthly forecast 21 April, 2014) of more attractively priced cargos in May and June. This minimal interest, in turn, is pushing spot prices even lower out through the end of 2Q 14.

Canadian exports

Canadian exports will play a vital role in determining gas supply available for US storage refills in the months ahead. Total Canadian storage plummeted to a year-on-year deficit at end-March. By end-October, eastern Canadian inventories are virtually assured of recovering to near recent norms given the dominance of utilities in the region, but PIRA’s Reference Case assumes a gaping hole will remain in western Canada where a very high percentage of storage is merchant-owned. This latter assumption exposes Canadian exports to serious downside risks that could be further undermined by National Energy Board (NEB) regulatory actions in response to pipeline safety concerns in Alberta.

Russian gas sales

It is not in the interest of the main players – Russia, Ukraine and the EU – for gas supply to be disrupted in any way. The kicking down the road of the gas debt issue to next month confirms PIRA's belief that it is largely a tempest in a teapot. What is largely being missed here in the political maelstrom is that Russian gas marketers are quietly selling more gas to Europe than ever before and at a price that will meet or surpass their revenue targets for 2014.

PIRA Energy Group believes that in spite of a generally residual role in European electricity power, the exposure to Russian gas is diverse among the power markets. In the US, the uptick in coal prices is unlikely to continue.

As the Russian-Ukrainian crisis keeps Europe anxious about the Russian gas supplies, the issue of how much gas-fired capacity is currently being operated across the European markets is becoming more relevant. While the role of gas across Europe has generally diminished and is now residual, there are still pockets of gas-fired generation across several markets. Within Europe, the power market most largely exposed to gas supply losses is Hungary, which is especially vulnerable, given a high reliance on gas-fired generation and the almost total lack of alternatives to Russian gas imported through Ukraine and Austria.

Uptick in coal prices unlikely to continue

Coal prices largely moved higher last week, with API#2 (Northwest Europe) prices leading the charge. The rise in API#2 was likely a delayed response to the threat of a cutoff of Russian gas through Ukraine two weeks ago, as it was reported that several market participants covered short positions. While Atlantic Basin prices remain weak (particularly with the full return of Colombian export capacity and impending further reduction in European coal burn), the market seems hesitant to depress API#2 prices below $75/mt for an extended period.

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.

Adapted from press release by Ted Monroe

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/24042014/pira_weekly_report_reveals_that_flexible_buyer_opportunities_will_increase_as_asian_lngspot_prices_fall/