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Natural gas to take market share from coal

25 January 2019 11:48 (UTC+04:00)
Natural gas to take market share from coal

By Trend

Natural gas is expected to take market share from coal, Trend reports referring to the forecasts of Capital Economics, the UK-based consulting company.

"We think that there will be persistently strong growth in global natural gas demand in 2019. That said, growth will probably slow relative to 2018. Last year, China’s gas (pipeline and liquefied natural gas) imports rose by nearly 32 percent as the country continues to switch household energy from coal to natural gas," said the report.

Capital Economics pointed out that demand growth was also very strong in the US, but this was in part down to a very hot summer, which boosted power demand for air-conditioning.

"Spot liquefied natural gas (LNG) prices have fallen sharply lately. What’s more, they will remain under downward pressure owing to the expected jump in global supply (as US export plants come online) and, if we are right, further declines in the oil price. We expect the price of LNG to average $8.4 per million (British Thermal Units) mBtu in 2019, down from $9.7 in 2018," reads the report.

Turning to coal, the consulting company forecasts markedly lower growth in demand as a result of both slower global economic growth and efforts to reduce consumption of the highly-polluting fuel. Indeed, GDP growth in China, by far the largest consumer, started to slow in 2018 and prices have further to fall. China’s policy on coal will be crucial.

"The country has been encouraging domestic production as part of efforts to reduce its reliance on imports. To this end, foreign buying plummeted in late 2018. That said, stocks at ports have held up, despite lower imports, pointing to subdued domestic demand."

The company analysts think weaker Chinese demand will push the price of Pacific Coal to $90 per ton by end-2019, down from around $100 currently.

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