NBP: the downward trend continues
NBP prices are continuing with the downward trend that got under way in early December, and have fallen from €30/MWh (US$11.9/MBtu) on 3 December 2013 to €18.9/MWh (US$7.7/MBtu) on 6 May – a decrease of 37%. The average for the month of April stood at €20.7/MWh (US$8.4/MBtu), 10.8% down on March. The tense situation in Ukraine does therefore not appear to be having any significant effect on NBP – apart from a couple of one-off peaks on 3 March (8.8%, Ukraine placed its military on combat alert) and 7 April (6%, start of fighting in eastern Ukraine). The market context is the reason for this downward trend: 1/ demand is slightly below seasonal norms; 2/ European stocks (which stood at 41.7 Gm3 on 6 May) are the highest they have been at the same period since 2010; 3/ the LNG market is continuing to shrink – Asian prices are at US$14/Mbtu; 4/ there are no significant pressures affecting the oil market (average Brent prices were US$107.5 in March and April). This situation is pushing down listings which are now at around €20/MWh (US$8.1/MBtu) over the summer and €26/MWh (US$10.5/MBtu) for next winter. There is still a great deal of uncertainty over the results of the negotiations that got under way in early May between Russia and Ukraine in relation to the delivery price of Russian gas and payment terms (prepayment in June has been mentioned). Disruptions to the gas trade with Ukraine and even all of Europe are possible in June. This would doubtless affect prices.
Global natural gas activity showed very mixed results in 2013, according to CEDIGAZ in its latest survey: The 2013 Natural Gas Year in Review
PARIS, 6 May 2013. In an economic and geopolitical climate still unstable, the world gas expansion moderated for the second consecutive year, according to the first estimates for 2013 released by the International Association CEDIGAZ today.
Natural gas consumption only rose by 1.3%, down from an average growth of 2.8% per year in the previous decade. Natural gas still suffers in particular from severe competition with coal in the power generation sector. Inside the EU-28, actual consumption was estimated down 1.9% to 460 Billion cubic metres (Bcm). This poor performance brought European consumption to levels not seen in more than 15 years. In the US, rising gas prices compared to 2012 has often made coal more competitive and penalized gas consumption in the power generation sector, causing it to fall by 10.5%.
NBP: very pronounced downward trend
The NBP price in March stood at €23.2/MWh (US$9.4/MBtu), 4.7% down from February and 13.6% down from January. The first listing for the month of April was at €20.7/MWh (US$8.4/MBtu), 10.8% below the average for March. These are relatively low levels which mark a return to the listings seen in 2011. However, the market is not expecting to fall dramatically over the summer, and a mean price of €20.9/MWh is forecast for NBP. Several factors seem to be behind this downward trend. Demand continues to be weak in the UK – 79 Gm3 in 2013, as opposed to 99 Gm3 in 2010. This is also the case for the 28 countries that make up the European Union – consumption in 2013 was at 462 Gm3 (source: Eurogas), down 13% (70 Gm3) compared with 2010. The competitive price with coal, estimated at €14/MWh, is also considerably lower than the current price. And the price of Brent is falling, now standing at less than US$106/b.