Natural Gas Market - Page 21

Natural Gas Markets Show Disturbing Signs of Weakness

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The 2014 edition of CEDIGAZ’s flagship survey Natural Gas in the World highlights some disturbing signs of weakness on the demand and supply sides, indicating structural challenges that will need to be addressed before a golden age of gas can occur.

In 2013, growth in worldwide gas demand decelerated, up by only 1% versus 2.4% in 2012. This is less than the 3% growth achieved by coal and, most remarkably, less than that of oil (1.4%). Moreover, gas was the only fossil fuel to record lower growth in 2013 than in 2012. This phenomenon may be observed even in Asia – a powerhouse in terms of growth in gas demand – where demand rose 4% in 2013, down from 6% one year earlier. Gas demand had already shown its limitations in 2012, when it gained only 2.4%, compared to an average growth of 2.8% per year in the previous decade.

International Gas Prices – October 30 , 2014

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NBP: volatile and rising

NBP and CoalThe NBP price stood at €21.8/MWh ($8.1/MBtu) in October, an increase of 4.5% in one month. However, it stayed at a level that continues to be moderate, 17% lower than the price a year ago. The market remains relatively volatile (-5% to +4% compared to the average) influenced by factors such as the temperature, fluctuations in Norwegian deliveries and declarations related to the Russo-Ukrainian negotiations. For instance, on October 17 (+1.6%), the Russian president warned Europe about big transit risks for gas this winter, just before the October 21 negotiations with Ukraine (still ongoing on the 29th). For now, the market is not anticipating a crisis. The projected winter price remains moderate, between €23.5 and 25.5/MWh ($8.7 and 9.4/MBtu) compared to €26/MWh ($10.3/MBtu) last winter. Actual trends will depend in particular on temperature (currently moderate) and deliveries from Russia. The range of “possibles” remains fairly broad, with Asian LNG providing a potential ceiling for the NBP price in the event of a crisis.

Data as of october

International Gas Prices – October 7 , 2014

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NBP: An uptrend with fluctuations

NBP and coal priceThe NBP price continued its upswing, which began in July. In early October, it stood at €22/MWh ($8.1/MBtu), up from €20.9/MWh ($7.7/MBtu) in September (+20% compared to August). The price for the upcoming winter months is expected to be €25-26/MWh ($9.2-9.6/MBtu), slightly lower than anticipated a month ago. But the market is relatively nervous, as evidenced by the sudden spike of 4.6% on October 1 followed by a drop on the same order of magnitude two days later. These fluctuations reflect uncertainty about demand (due to the temperature) and the tensions surrounding the negotiations between Russia and Ukraine (the Russian proposal: 5 Gm3 over the winter at $385/1000 m3, i.e. $10.2/MBtu). The spike on October 1 thus coincides with the announcement that Russian gas deliveries to Slovakia will be halved.