Feb 21 - Fitch believes that the ongoing low natural gas prices in the U.S.
continue to have a positive effect on many issuers, particularly in
energy-intensive manufacturing sectors like refining, chemicals, and
fertilizers. However, low natural gas prices have pressured electrical utilities
and others that depend on the sale of excess power and continue to put pressure
on exploration and production companies with significant spot exposure to North
American natural gas.
Surging domestic oil and gas output has been beneficial from a macroeconomic
perspective. The December U.S. trade deficit narrowed by 20.7% ($38.5 billion)
largely based on an all-time record export of petroleum products and the
smallest amount of oil imported in 16 years. Over the near term, we believe this
export activity will continue.
For example, domestic refiners will continue to have a significant competitive
advantage due to their access to cheap natural gas and low cost domestic light
crude. In 2011, the U.S. exported $52 billion worth of petroleum products. In
2012, exports rose to $61 billion. However, low natural gas prices may also
continue to put pressure on power producers that depend heavily on the sale of
excess power to subsidize their retail revenue. We expect wholesale power prices
to increase slowly through 2015 but remain near current levels, driven by
historically low natural gas prices, high capacity reserve margins, and weaker
demand. We also believe that increased dependence on natural gas can create
issues over the longer term. For example, if low gas prices result in
accelerated retirement of already challenged coal fired plants, the ability to
revert to coal usage following those retirements may be limited.
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expressed are those of Fitch Ratings.