Last Friday, natural gas prices at the NBP saw a significant decline. This is due to positive demand predictions and a decrease in coal and carbon prices. The preceding bullish sessions came to a sudden end, with the May 24 front-month contract seeing a significant drop of 2.9p/therm (0.1p/kWh) compared to its previous close.
What does this mean?
One of the main reasons for this decline was the prediction for warm weather during mid May. These weather predictions have projected the demand for gas will remain below seasonal average. As the weather gets warmer, more people will turn off their heating, decreasing the seasonal demand and pressuring gas prices.
On top of this, carbon and coal prices contributed to the bearish settlement in the market. ICE revealed that benchmark contracts for Rotterdam Coal and Carbon EUA experienced losses by the day of 4% and 2.1%, contributing to lower wholesale gas prices.
Last week, reports indicated that a gas leak occurred during maintenance at Norway’s Hammerfest LNG. However, this was quickly resolved. Despite this, it is unknown whether the incident will impact the terminal’s planned restart. This isn’t the first gas leak Hammerfest have had recently. Last May, there was gas leak resulting in temporary shutdown of the terminal.
In Texas, the Freeport LNG faced another outage with its third train (plant). It is believed that a cryogenic heat exchanger is the cause of the issue. Freeport LNG have now had two incidents in two weeks, with the third train (plant), again, causing issues. Feed gas nominations dropped to 5% of capacity, with pipeline utilisations reaching nearly 0%. This means, when suppliers come to buying wholesale LNG, the supply issues bring the cost higher, increasing the cost per unit. The reduced feed gas flows have been limiting production to one quarter since march.
Summary
This Monday, gas prices at the NBP continue to fall. Currently, the Winter 25 front-season is trading around 2.5p/therm (0.09p/kWh) below its previous settlement. Even though the Hammerfest LNG and Freeport LNG terminal were experiencing maintenance issues over last week, these clearly did not have a substantial effect as wholesale gas prices are slowly declining. With the weather getting warmer, and the prices of coal and carbon falling, the energy market has shifted towards a more bearish outlook in the near term.
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