The document discusses trends in global energy markets in 2014. It notes that oil prices plummeted towards the end of the year due to oversupply and weakening global economic growth. Natural gas prices also fell to four-year lows in Europe. Carbon prices in the EU rose as allowances were cut, but remain below levels needed to incentivize switching from coal to gas. Global coal prices continued a four-year downtrend due to weaker than expected demand growth.

1. $/tonne
01/01/14
140
120
100
80
60
40
20
0
02/01/14
03/01/14
04/01/14
05/01/14
06/01/14
07/01/14
08/01/14
09/01/14
10/01/14
11/01/14
12/01/14
$/bbl
Oil
The value of ICE Brent crude oil futures plummeted to-
wards the end of last year amid the burgeoning
over-supply and concerns over the health of the global
economy. OPEC has resisted production cuts to pro-
tect its market share while non-OPEC producers are
also reluctant to take the hit. Many are predicting a
period of lower prices, with widespread implications
for the global economy and the wider energy complex.
Total gas demand
Gas demand from
the domestic sector
British gas demand
vs. temperature
British weather forecaster the Met Office announced that 2014 was the warmest year on
record. Gas demand from households slumped but cheaper gas prices led to an in-
crease in gas demand from power plants during the summer. This saw prices hitting a
four-year low, but contracts were also support by concerns over the Ukraine crisis.
Benchmark carbon contract
on 2 Jan 2014 (
Benchmark carbon contract
on 31 Dec 2014 (
Switchingprice (
40
35
30
25
20
15
10
5
0
€/tCO2e
Benchmark carbon contract
on 2 Jan 2014
Benchmark carbon contract
on 31 Dec 2014
Switching price
Carbon
The benchmark carbon contract rose 52% throughout 2014, as EU countries have cut
the amount of carbon allowances they auction. The measure, know as back-loading,
means to temporarily provide support in an oversupplied EU emissions trading system
(ETS). Higher carbon prices also reflect hopes that a longer-term reform, the market sta-
bility reserve, will be agreed soon. However, emission prices still remain well below the
level needed to make gas-fired generation, which is less carbon intensive, equally profit-
able with CO2-intensive coal-fired generation.
Global thermal coal
Global thermal coal prices are now in a four-year downtrend because demand failed to
live up to expectations. Unless producers cut back on output, which was ramped up in
recent years on expectations of ever growing demand in Asia in particular, there is little
hope that the market will rebalance. In 2014, it was the slowing consumption in China in
particular, on the back of lower economic growth and attempts to battle air pollution,
which pushed prices even lower.
100
80
60
40
20
0
CIF ARA 2011 CIF ARA 2012 CIF ARA 2013 CIF ARA 2014 CIF ARA 2015
120
140
German GDP
vs. power consumption
German consumption of electricity from the public grid has decoupled over recent years
with demand hitting a 15-year low in 2014. The root cause is high end-customer power
prices, which spurred investments in energy efficiency, as well as a boom in power
generation for off-grid domestic consumption.
6
4
2
0
-2
-4
2010 2011 2012 2013 2014
Power consumption y/y % change GDP y/y % change
MARKETS IN FLUX
ENERGY
Wind power generation
2014 was a record year for wind power generation across many northern European countries,
helped by favourable wind conditions and growing capacity mainly in the off-shore area. However,
increased wind output can also displace gas-fired generation, with coal plants often providing
much baseload generation.
2013 2014
DENMARK
SPAIN
UK
GERMANY
ITALY
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0
% share of wind power generation in overall power mix
The south and east Asian spot LNG prices
have fallen drastically due to falling crude
prices, making oil-linked LNG contracts
cheaper and causing demand to weaken in
the region. New supply sources such as
Papua New Guinea have hit the market and
winter temperatures have been milder. This
has seen more cargoes directed towards
Europe as a result.
1/2/14
2/2/14
3/2/14
4/2/14
5/2/14
6/2/14
7/2/14
8/2/14
9/2/14
10/2/14
11/2/14
12/2/14
25.000
20.000
15.000
10.000
5.000
0.000
$/MMbtu
NBP vs. EAX
NBP front-month EAX front-month
Oil indexed
gas vs. hubs
Slumping oil prices also had implications for a significant
quantity of gas contracts indexed to the price of oil in
long-term contracts. The price of gas trading on the Dutch
TTF and German NCG hubs was at parity with oil-indexed gas
in October, but had become much cheaper towards the end
of the year. Many are expecting that Q2 ‘15 will be when the
full effects of the decline in oil will be felt in the long-term
market as well as the hubs, as the oil-indexed prices are
valued with a six-to-nine month lag.
Russian oil indexed Q1 '15 (€/MWh)
NCG Q1 '15 (€/MWh)
TTF Q1 '15 (€/MWh)
US oil imports
One of the largest shifts in the energy markets in recent years is the growth of hydraulic fracturing,
known as ‘fracking’, which has almost completely halted the need for US refiners to import
light-sweet Nigerian crude as they can rely on their own domestically produced - shale oil.
US Imports of Crude Oil and Petroleum Products (Thousand Barrels) for first nine months of the year
500000
0
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Where do you see the energy market heading in the next six months?
Discuss via @ICIS_Energy
€€€€
€
0
Q1’15- 1 October Q1’15- 1 November Q1’15- 1 at expiry
15
25
10
20
30
€/MWh
Find out more at www.icis.com
14000
12000
10000
8000
6000
4000
2000
0
mcm/month
MAR
JUN
SEP
DEC
MAR
JUN
SEP
DEC
MAR
JUN
SEP
DEC
MAR
JUN
SEP
DEC
MAR
JUN
SEP
DEC
2010 2011 2012 2013 2014
Temperature
%
Data from ICIS, Energinet DK, RenewableUK, AGEB, Terna, Destatis, REE, Ukrtransgaz, FGSZ, Gaz-system, Eustream, National Grid, Met Office, EIA
Russia halted gas exports to Ukraine in June 2014 due a dispute over the debt Ukraine has
run up for its gas imports. However, following an interim agreement on the debt and pricing
reached on 30 October, Russian exports to Ukraine resumed on 9 December 2014.
Ukrainian incumbent Naftogaz paid Russian producer Gazprom $378m (€308m) in advance
for 1 billion cubic meters (bcm) of gas on the night of 5 December. However, Naftogaz
aimed to buy as little gas from Gazprom as possible before the end of last year, instead im-
porting gas from Europe via Slovakia and Poland.
This is because the oil-indexed gas price in the supply contract was expected to come
down to $365/ thousand cubic meters (kcm) from 1 January 2015, from the initial price of
$385/kcm. According to Ukrainian Prime Minister Arseniy Yatsenyuk in December, Ukraine
is currently buying 60% of its gas from European suppliers.
Ukraine gas imports
Russian Imports
0.000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1.000
2.000
3.000
4.000
Slovak Imports Hungarian Imports Polish Imports
0.500
1.500
2.500
3.500
bcm/month
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