Norwegian gas supply outages force wholesale prices up
Norwegian outages continued to push NBP gas prices higher on Thursday.
According to data from offshore operator Gassco, pipeline flow nominations via the Langeled pipeline into the UK’s Easington terminal fell by 50.8% amid climbing capacity restrictions in Norway.
Flows into Scotland’s St Fergus terminal via the FLAGS system did however increase from 0mcm to 9.9mcm, mitigating the decrease, but overall imports still declined by 27.3% when compared to the previous gas-day. Below-average EU storage levels continue to offer longer term, underlying support to European gas prices. Data from Gas Infrastructure Europe shows that as of 4th June, overall reserves stand at 49.88%- almost 21 percentage points below the same date last year.
Alongside a steady increase in natural gas prices, reports emerged of a so-called ‘Spanish plume’ event that is forecast to send warmer air from the Iberian Peninsula over into Northwest Europe. Such events have historically caused a surge in temperatures which is liable (much more so in continental Europe) to boost cooling-related power demand. This in turn could limit the availability of power imports from the UK’s neighbours, squeezing supply and playing into bullish sentiment.
In other news, the UK’s Centrica has signed a 10-year supply agreement with Norway’s Equinor for 5bcm (billion cubic meters) yearly contractual supply. This is enough to fuel around 5 million households, 10% of the UK’s gas needs, and the deal is worth an estimated £20 billion based on current wholesale prices.
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Price commentary courtesy of Crown Gas and Power 