PIRA Energy Market Recap for the Week Ending May 23, 2016
May 25, 2016 - PIRA’s outlook for the U.S. coal market in 2017 projects that the current trajectory of coal supply cuts will ultimately drive stockpile levels back into balance early next year. Rising natural gas (and oil) prices will result in potential coal market shortfall, as coal demand recovers against a backdrop of a much smaller and perhaps constrained coal logistics chain.
State of the Global Economy in Early Second Quarter
In PIRA’s economic outlook for 2016, global activity is expected to pick up steam after a sluggish start to the year. For this forecast to track, data for the second quarter will need to register meaningful improvements from the first quarter. It is too early to determine whether the expected lift is taking place — key global statistical releases currently extend only through April. But available information has been generally encouraging for the U.S., Europe, India, and Brazil, while growth in China will probably stay similar to the pace observed during the first quarter.
D.C. Circuit Grants En Banc Appeal for Clean Power Plan Litigation
In another unusual move in a litigation that has been marked by unusual moves, the D.C. Circuit, of its own volition, decided to shorten the review of the Clean Power Plan by bypassing the three-judge panel and preemptively granting review to the entire D.C. Circuit Court en banc. PIRA had expected a review by the Court en banc in the event EPA lost in the initial panel decision. That it has been granted now does not change our expected timeline much. Key to whether the move actually impacts the CPP’s chances at being upheld is whether two Democrat-appointed judges on the D.C. Circuit — Merrick Garland, and Nina Pillard — will recuse themselves from considering the merits of the case, impacting the balance of power on the Court.
Coal Pricing Moves Sideways Along with Oil
Prompt seaborne coal prices mirrored those of oil last week, with a modest rally on Monday largely negated by a downshift over the balance of the week. 3Q16 API#4 (South Africa) and FOB Newcastle (Australia) prices ticked up modestly, while API#2 (Northwest Europe) lost some ground. Coal fundamentals, specifically in the Atlantic Basin, offer minimal support to pricing currently, given weak demand from Europe and strong supply from Russia. The most bullish factor for coal pricing is the continued strengthening in the oil market.
The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.