Natural Gas Market - Page 12

International Gas Prices – May 11 , 2016

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NBP: influenced by the LNG and oil markets

NBP and coal price GraphIn April, the NBP saw fairly marked fluctuations, ranging from +18% to -10% compared to the monthly average. In a temporary surge, it exceeded €15/MWh ($5/MBtu) on April 26 and 27. A situation of momentarily sustained demand coincided with deficiencies of supply, resulting in heavy recourse to storage. However, monthly averages have been more stable since February, between €12.7-13/MWh ($4.2-4.3/MBtu). The price for early May and the forward quotations for the summer months (until September) stand at about the same levels. Obviously, lower prices cannot be excluded, in light of the market equilibrium conditions. On April 11, the price fell to €11.5/MWh ($3.9/MBtu), its lowest level in recent months, in step with the conditions prevailing on the LNG market in Europe at that time.

2015: A Third Year of Moderate Growth in Gas Demand

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Natural gas demand grew by 1.6% in 2015 according to Cedigaz after having stagnated in 2014. However, this apparent, if modest, resumption of global gas market growth can be misleading as the higher growth rate is essentially the result of a weather driven recovery in the EU where demand rebounded by 4.5% after having dropped by 11% in 2014. For the rest of the world gas demand growth was actually lower than in 2014 (1.2% vs. 2%) and was pulled by a limited number of countries led by the US. The inability of natural gas demand to keep pace with an accelerated supply growth, led to an imbalance in the global gas market and to a price weakness which is expected to continue in the short and medium-term, amid a sluggish economic environment.

The year 2015 saw considerable changes in macroeconomic and price factors. Economic growth stood at 3.1%, lower than at any time since 2012 (3.3/3.4%) and also lower than the 10‐year trend (3.8%). This was the result of the relatively modest growth of the emerging countries (4% compared with 6% over ten years), although western countries’ growth rate exceeded the 10‐year average (1.9% compared to 1.5%).  International crude oil prices fluctuated to new lows, with Brent averaging 52/bl, down by 47% from the previous year.

International Gas Prices – April 8 , 2016

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NBP: – 8% in early April compared to the March average

NBP and CoalThe winter season for the gas industry (October 2015 to March 2016) closed with the NBP price very low at €15.4 /MWh ($4.9/MBtu), which is 30 to 46% lower than for the three previous winters. The downtrend that started in early 2015 resulted from a relatively abundant supply and a decline in the prices of contracts 100% indexed on oil. In fact, these prices defined the NBP trend. The decline continued in the first April quotations (-8% compared to March) as the NBP dropped below the €12/MWh ($4/MBtu) mark. The markets are expecting a minimum price of €11/MWh ($3.7/MBtu) during the summer. The fact that the volumes stored in Europe are relatively large partly explains the absence of price pressure.