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Energy

Power Forecast Briefing: Natural Gas And Coal Dynamics, Pressure On Nuclear, And Southwest Capacity

Energy

Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

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Coal Forecast Surging Export Volumes Aid Coal Production As Gas Competition Tightens

Preview: 30th Annual Power and Gas M&A Symposium

Watch: Power Forecast Briefing: Natural Gas And Coal Dynamics, Pressure On Nuclear, And Southwest Capacity

Jun. 20 2018 — Steve Piper shares his Q1 2018 analysis and power market insights along with guidance from our Power Forecast solution on the Market Intelligence platform. The next guidance report will be released around mid-July 2018.

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Watch: Power Forecast Briefing: Fleet Transformation, Under-Powered Markets, and Green Energy in 2018

Steve Piper shares Power Forecast insights and a recap of recent events in the US power markets in Q4 of 2017. Watch our video for power generation trends and forecasts for utilities in 2018.

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Coal Forecast Surging Export Volumes Aid Coal Production As Gas Competition Tightens

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Higher export volumes aid coal production as gas competition tightens domestically

Jul. 20 2017 — Coal production made gains through June as modest electricity demand to open the summer was offset by stronger exports. Weekly shipments for June came in 24% higher than the same period last year, continuing the improved production results for 2017. However, easing natural gas prices during June provided little headroom for thermal coal prices. The NYMEX CAPP eased by $0.25/ton (0.5%) for the month, while the NYMEX PRB gained $0.24/ton (2.2%).

Natural gas prices traded lower during June than in May, with low electricity demand doing little to clear surplus storage. After opening the month at $3.05/mmBtu, Henry Hub spot prices varied during mid-month from $2.85-3.12/mmBtu, before closing at $3.07/mmBtu. Natural gas remains in a moderate surplus, with June injections trailing modestly below historical averages. Storage levels as of June 23 stood at 2,816 Bcf, 182 Bcf above five-year averages. The surplus restrained natural gas markets during the month, with warmer weather the last week of June kicking off the cooling season and providing a boost to prices.

Coal inventories remain in surplus as well, with April stockpiles growing to just over 166 million tons, 9.3% above normal. The growth in inventory corresponds to estimated displacement of coal from natural gas generation resulting from Henry Hub prices declining by 20 cents per mmBtu. Looking ahead to the summer season, robust cooling demand could add 1.5 million tons per week to production, which would drive coal production to levels not seen since the summer of 2015. For the four weeks ending June 24, coal shipments averaged 15.5 million tons, as demand into the summer season picks up. Production levels continue to improve overall, about 24% higher than the same period last year. Inventories remain above normal, and low electricity demand shoulder season may do little to clear them, tending to keep a lid on prices.

Higher natural gas prices have boosted coal demand for the first half of 2017, especially compared to the dramatic loss of demand that occurred during the first half of 2016. However, surpluses linger in both the coal and natural gas markets going in to summer. If electricity demand remains low, growth in coal production could taper during the peak season.

On the improved demand picture for the year, the CAPP and NAPP coal regions are projected to beat 2016 production levels. A firmer natural gas strip, easing coal retirements during the year, and stronger seaborne metallurgical markets all contribute to the improved outlook. The markets for Illinois Basin and Southern PRB are also projected to rebound by 44 million tons this year on improved price competitiveness.

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Watch: Preview: 30th Annual Power and Gas M&A Symposium

Hear from S&P Global Market Intelligence Senior Director, Nick Kapur, about the upcoming Power and Gas M&A Symposium on February 13-15, 2018, in New York City.