International Gas Prices - Page 12

Due to falling temperatures and delivery constraints, the NBP price has been oriented upwards since the end of January: it rose by more than 9% over two weeks, to about €22/MWh ($7.4/MBtu). However, the overall trend is down. The monthly average for January was €20.5/MWh ($7.0/MBtu), i.e. 11% below the average for December. This general movement is reflected in the 12-month moving average, which is now standing at €20.5/MWh ($7.0/MBtu) after steadily falling since last March (€27/MWh ;$10.8/MBtu). The market is anticipating lower prices in the upcoming months: €19.9/MWh ($6.7/MBtu) next summer and €22.8/MWh ($7.7/MBtu) next winter. These trends are consistent with the current conditions on the market, marked by less pressure on the LNG, coal and oil markets. Given the quantities of LNG available in Asia, the spot prices are coming into convergence with the European market at around $7/MBtu, which encourages the purchase of European LNG. As for oil, the upward shift in the oil price observed since February 2 won’t be changing the downtrend on the natural gas market.

 The NBP price stood at €23.2/MWh ($8.4/MBtu) in December, having fallen by 2% in one month and by 18% compared to December 2013 (€28.3/MWh). On November 25, despite the Norwegian disruptions favoring an upturn, the NBP began to slide, descending from €25.7/MWh ($9.4/MBtu) to €20/MWh ($7/MBtu) in the first few days of January. The reasons for this downtrend are the mild weather conditions, the non-impact (so far) of the Russo-Ukrainian crisis and changes on the energy scene. The coal price dropped 15% in one month, from €59/t in early December to its present level of €50/t. Asian LNG finds itself below $10/MBtu, compared to $15/MBtu in October. Finally, the oil price is in free fall, down by 56% between June ($112/b) and January (with a monthly average of $49/b and a price on January 13 of $45/b). Brent forward prices are expected to average $52 in 2015, which, if accurate, would bring European prices in 100%-oil indexed contracts below €19/MWh ($6.6/MBtu) by next summer. NBP prices for summer 2015 are currently in line with these levels.

In 2014, the Brent price stood at $99/b, down by nearly $10/b compared to 2013 ($108.6). Of course, the major event of the year was the Brent’s plunge from $112/b in June to $62/b in December. The trend continued in January 2015: the Brent lost another $10 and reached $45/b. The reason for this downswing, over and above flagging economic growth and the dollar’s progression since June (-12% for the euro, worth $1.18 in January), is OPEC’s decision on November 27 to abandon the role of swing producer. OPEC aims to get producers of non-OPEC oil, LTO and high-cost unconventional oil to slow their increase in output to avoid a steady erosion of OPEC’s market share.