PIRA Energy: End User Gas Demand to Be Higher This Summer in UK

NYC-based PIRA Energy Group believes that the U.K.’s end user gas demand and storage injections will be higher this summer. In the U.S., January’s EIA 914 Survey data suggest structural declines have taken hold in overall natural gas output. In Algeria, Sonatrach announced the first LNG is being generated from the replacement train at Skikda.

Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

Last week’s U.K. National Grid assessment confirmed PIRA’s view that both end user demand and storage injections will be higher this summer in the U.K. Day ahead prices remain at a significant premium to oil-indexed levels, which is understandable given the PIRA 10-day demand outlook, but the premium placed on the summer and prices next winter is less understandable. In addition, the outlook for the rest of Europe is decidedly weaker than the U.K. due to its greater exposure to renewables and the influence they will have on gas use this summer.

January’s EIA 914 Survey Data Suggest Structural Declines

The EIA’s 914 Survey data for the month of January suggests structural declines have taken hold in overall U.S. natural gas output. Production losses in Louisiana outpaced growth in the EIA’s “other states” category, which contains the Marcellus, for the third consecutive month. If Haynesville declines continue at the current clip, year-on-year U.S. production losses could easily extend into 2Q13, and possibly even 3Q13.

Algeria’s Sonatrach Announces the First LNG to be Generated from the Replacement Train at Skikda

Last week Algeria’s Sonatrach announced the first LNG is being generated from the replacement train at Skikda. Most notable about these cargos is that they do not appear to be under any sort of medium- or long-term contract. Sonatrach has managed to achieve the highest average price for its spot cargos in Asia (excluding volumes to India) over the past two years when compared to the other five Atlantic Basin LNG producers, which is also a price higher than the weighted average of Japanese contract prices.

NYC-based PIRA Energy Gro up reports that French electricity prices were impacted by weather. In the U.S., higher natural gas prices could lift coal outlook. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

French Electricity Prices Impacted by Weather

France is the market where prices continue to mirror more closely unseasonably colder weather conditions, especially since French nuclear availability remains below year ago levels. The sensitivity of French prices to weather conditions will be amplified by the imminent closure of fossil fuel plants.

Higher Natural Gas Prices Lift U.S. Coal Outlook

PIRA expects that higher natural gas prices will lift coal dispatch relative to prior year levels, eventually drawing stocks and firming coal pricing in 2014 relative to forwards in western and high sulfur eastern coal markets. CAPP (Central Appalachian) coal pricing still lies below breakeven levels with gas-fired dispatch in most markets. As such, its price recovery will tend to be more delayed relative to market forwards.

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LNG World News Staff, April 10, 2013; Image: Dragon LNG