Last Thursday, the market saw significant shifts as a result of unexpected factors. For the majority of March we saw wholesale gas prices on a slow but steady rise. This week, the lowering expected demand and stronger Norwegian flows are restraining the rising gas prices at the NBP.
Last Thursday’s close saw the most substantial declines, with wholesale gas prices dropping 3.03p to 66p/therm.
What does this mean?
With an increase in Norwegian export flows into the UK’s Eastington terminal, there is now a reduction in offline capacity at the Kollsnes processing facility, adding to the oversupply of gas exports in the UK.
Additionally, National Gas data revealed that demand for gas prices fell below seasonal average by 29 million cubic meters (mcm), pushing the low market sentiment.
The Freeport LNG terminal in Texas saw its capacity limiting due to 64% decrease in exporting because of unplanned maintenance expected to continue through May. European suppliers, including the UK, will find this news especially frustrating, considering they are the largest consumers of US-produced LNG.
Summary
To conclude, you should expect to see energy wholesale prices decrease as we are expecting a reduced LNG supply from the US for an extended period, and an oversupply of gas from Norway. For the May 24 front-month, contracts are being offered at around 2.2p/therm below its previous settlement.
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