Saxo Bank's nat gas forecast bullish. Sweet.
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Natural Gas Surges 50 Percent
Natural gas enters 2011 with a supply surplus as the global downturn has resulted in supply exceeding demand for two years “ resulting in two years of double digit losses. But heading into 2011 the fundamentals for Henry Hub improve dramatically. Increased industrial demand on a US recovery, historical cheapness relative to crude and coal, forward curve flattening and action on proposals to export more US natural gas (OTCBB:UNGS) reserves all combine to make passive investments in gas more profit- able. And the icing “ an unusually frigid cold snap leads to a rapid depletion of stocks. Henry Hub thus sees a one-in-25 year move up by 50% in 2011.
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Not sure who these folks are, but I like the forecast. Not sure how accurate it will be. If they are even close gassey stocks should rocket.
Coal to nat gas switching is also in high gear from the numbers I have seen, higher coal prices are making nat gas generating units look awful good these days
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Analysts at Raymond James say the 2011 outlook for continued softness in US natural gas prices and potentially higher delivered coal prices suggest that coal-to-gas switching is likely to remain robust in 2011, after essentially showing very little impact in 2010. Raymond James is forecasting that natural gas generation demand could rise an additional 1 Bcf/d to 2 Bcf/day next year at coal's expense.
The firm is modeling a coal-to-gas switching impact of 1.5 Bcf/day, displacing nearly 35 million tons of coal for 2011. In July of this year, coal prices in the US traded in the low $60/ton area, but as of last week, Big Sandy coal prices had risen to around $67/ton zone. A year ago, coal sold for $46.25/ton and as long as an uptrend in coal prices remains intact, it’s likely that switching will continue.
While increased switching is certainly not a positive for the coal markets, we don't necessarily see it as a death sentence either, Raymond James said. A confluence of factors, including declining production, incremental export opportunities and additional demand from newly constructed power plants could drive near-term coal prices higher even in a depressed natural gas pricing environment.
Earlier this year, a record hot US summer had utilities increasing coal purchases to meet power demand, and it appears that coal prices, which moved higher with the increased demand, will continue rising. Coal and gas traders agree this will likely accelerate coal-to-gas switching once temperatures start to drop.
The big switch over to natural gas as demand for electricity rises typically occurs when natural gas futures remain below $4/MMBtu, said a gas buyer for an Ohio utility.
However, coal-to-gas switching has been gaining momentum for years. In the US Midwest, Department of Energy demand data shows that 57% of the region’s electricity was generated from coal last year, down from 68% in 2008 and 70% in 2007. Meanwhile, gas-generated power rose to 23% last year from 16% in 2008. |
