Declining LNG supply increases gas prices

Gas prices continued to edge higher on Tuesday, amid declining LNG supply and a bullish wider energy complex.

The majority of contracts continued to go up in early trade amid unchanged fundamentals; both the front-month and front-season contracts broke above the 2.39p/kWh psychological level before promptly retreating back towards their previous settlement.

The end result was gains of circa 0.05p/kWh posted across the majority of curve contracts, with low LNG supply likely being the primary reason for support at the front-end.

According to data from National Gas, LNG send-out (within session) continued to decline throughout Tuesday’s session, averaging only around 28mcm/d, down by more than 20% when compared to the previous session which can be attributed to a quiet delivery schedule.

The current LNG supply outlook was perhaps made even bleaker by Mondays news that top US LNG producer EQT Corporation will begin to cut volumes this month in response to unfavourably low US gas prices, potentially limiting exports of the fuel to the European market.

Strengthening carbon prices likely extended gains to the far-curve, data from ICE shows that the Carbon EUA benchmark soared 6% day-on-day, the contracts biggest move so far this year.

Key contracts are being offered at a slight premium this morning, with the Summer 24 front-season contract last trading circa 0.034p/kWh above its previous settlement, at time of writing.

In terms of UK’s current electricity demand, if we check the latest half hourly period at the time of writing (09:30 – 10:00), electricity demand is currently 38.18 GW’s in the UK.

In terms of the generation mix, gas is currently generating 16.99 GW’s (42.60%) of the UK’s electricity. Wind power is generating 6.14 GW’s (15.38%) of the UK’s total electricity this morning.

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