Spot LNG prices to rise; coal and crude oil relatively unaffected

CRISIL Research is releasing this note to explain the impact of the recent earthquake and the subsequent tsunami on the Japanese nuclear facilities, and therefore, on the demand and prices of energy resources such as coal, natural gas and crude oil. CRISIL Research is monitoring the situation continuously and shall provide further analysis in accordance with the developments.
CRISIL Research expects the bulk of the ensuing power deficit to be covered by coal and gas-based plants. The incremental gas demand is likely to push up spot liquefied natural gas (LNG) prices from around US$9 per mmBtu to US$13-14 per mmBtu in the next 3 months. Germany’s recent decision to shut seven atomic power reactors (7.4 GW) for 3 months in the wake of the Japanese crisis and the resultant increase in gas demand would drive a rise in prices in the short term. While non-coking coal prices are likely to rise marginally because of incremental demand, coking coal prices are expected to fall owing to the temporary shutdown in steel capacities in Japan. Global crude oil prices, however, are unlikely to be affected due to limited impact on global trade dynamics.
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