Global coal, gas markets to be balanced until 2013

Thu Aug 30, 2012 2:06pm IST

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* LNG supply/demand to be 326 bcm in 2012 - BarCap

* 2012 coal import/export surplus to be 6 mln tonnes

By Henning Gloystein

LONDON, Aug 30 (Reuters) - Global coal and natural gas markets will be balanced or in slight surplus for the remainder of 2012 and in 2013 as weak demand is met by healthy supplies, although gas markets are expected to tighten in 2014, Barclays Capital said on Thursday.

The global market for liquefied natural gas (LNG) is expected to be balanced in 2012 and 213, with supply and demand seen around 326 billion cubic metres (bcm) and 350 bcm respectively, BarCap said in its Global Energy Outlook.

In global coal trading, BarCap said that 2012's import demands of 837 million tonnes would be met by available exports of 843 million tonnes, while 2013 would see import needs of 849 million tonnes met by 850 million tonnes ready for export.

"European natural gas demand continues to suffer from the weak economy and a poor competitive position against coal, with LNG cargoes being diverted to the higher priced Asian natural gas markets," BarCap said.

"Coal pricing remains subdued, with weaker demand growth from Chinese steel and power producers, coupled with healthy supply increments from traditional exporters and the U.S., leaving the seaborne market well supplied."

The healthy coal exports mean that BarCap expects prices to drop, with API2 (European) prices to average $94 per tonne in 2012, and $92 a tonne in 2013.

South African API4 prices were expected to fall from an average of $95 to $94 a tonne between 2012 and 2013, while Australian Newcastle coal prices would see a an annual average decline from $99 a tonne to $97 per tonne.

Despite healthy coal demand in Europe and Asia, BarCap said that "the story of the market has been supply, with most exporters able to increase production and U.S. volumes becoming more available."

GAS MARKET TO TIGHTEN IN 2014

For global gas prices BarCap said that it expected slight increases between 2012 and 2013 despite the balanced market.

Benchmark European (NBP) prices would rise from $9.4 per million British thermal units (mmBtu) in 2012 to $10.1 in 2013, while Asian prices would rise from $16.25 to $17.6 per mmBtu.

For the period after 2013, BarCap said that LNG markets could tighten markedly as new import terminal capacity outstrips export capacity additions.

"While the 2013 market balance looks just to be marginally tighter than 2012, 2014 could see a more significant tightening given the scheduled additions of demand."

In the United States, where a sharp increase of shale gas exploration has flooded the gas market, prices at Henry Hub, the main U.S. gas distribution centre, were expected to rise from $2.64 per mmBtu in 2012 to $3.25 in 2013.

BarCap said that it expected Asian gas prices to be around $19 per mmBtu in 2014, European prices to be $17.6 per mmBtu and U.S. prices to rise to $3.6 per mmBtu in 2014.