Geopolitical pressures pushes wholesale prices up again
Prices continued to go up at the NBP on Thursday, with sizable gains posted across the majority of gas contracts.
Both the front-month and front-season were propelled to new yearly highs, with the December 24 contract registering cumulative gains of 21.9% so far in November, with a complex mix of drivers serving as underlying support.
Geopolitical instability in Eastern Europe remains a key concern for European gas-hubs. The war in Ukraine appears to be quickly escalating and the pace and unpredictability of new reports will have certainly amplified perceived risk across wider energy markets.
Demand continued to climb well beyond seasonal norms, with data from National Gas indicating that system demand had reached circa 338mcm on Thursday, up 23mcm from the previous gas-day and almost 90mcm above the long term average for that date. The latest run of our 14 day model suggests that demand should ease slightly moving into next week as temperatures move back toward the typical November range.
Further pressure likely came from reduced Norwegian export capacity. According to data from offshore operator Gassco, unplanned maintenance at the Kårstø gas processing facility removed 15mcm of capacity across the gas-day, an outage that continues at a slightly higher rate of 19mcm this morning along with additional issues at the Oseberg field that are removing 5mcm, both with an uncertain duration.
On the other hand, the UK’s current premium against its European counterparts has attracted a rapid uptick in the number of vessels both signaling and arriving at British terminals. Three laden vessels have arrived this week alone, all from the USA and a further 6 vessels, comprised of American, Nigerian, Norwegian and Indian cargoes are expected to be delivered over the next 2 week outlook.
In other news, the Freeport LNG export facility in Texas experienced a failure of one of its 3 liquefaction trains on Wednesday into Thursday morning. The outage lasted 11 hours and reduced the facilities ability to convert natural gas into LNG (Liquefied Natural Gas), a process that is required in order to ship gas internationally, with the US being the largest supplier to the European market.
NBP gas prices have so far resumed their upward trajectory this morning, with the Summer 25 front-season contract currently being offered approximately 1.25p/therm (0.04p/kWh) above its previous settlement, at time of writing.
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Price commentary courtesy of Crown Gas and Power 