Nordic Supply Continues to Increase

Last Friday, wholesale natural gas prices experienced a further decline. This is because of increased Norwegian supply, an increase in hydropower reserves in the Nordic region and reduced demand because of warm weather conditions. Gas prices experienced a significant drop of around 3.5p/therm (0.12/kWh) across the near curve, thus reflecting the market adjustments.

What does this mean?

The continued increase in supply from Norway has contributed to lower wholesale gas prices. Gassco data revealed that flow nominations increased 60% into the Easington and St Fergus terminals compared with its previous gas-day. This shows the strong supply capacity from Norway.

With the weather getting warmer, there has been an increase in snowmelt. This has boosted the hydropower reserves in the Nordic region. The week-on-week increase in reserves has helped to create a stronger energy supply after the dry start to the year.

Maintenance at Australia’s Gorgon LNG terminal will significantly reduce supply over the next month. A mechanical fault in a turbine at one of the trains (plant) has been hindering production since late April. It is estimated that each week the plant is offline, it reduces overall capacity by 100,000 tonnes.

Summary

To summarise, the factors contributing to the downward trajectory of the energy market has been the sustained increase in flow nominations from Norway and an increase in hydro reserves from the Nordic region. In the next couple of weeks, it wouldn’t be surprising if the energy market went up. This is because of the Gorgon terminal in Australia needing maintenance, which will significantly produce less LNG over the next five weeks. 

The market only reflects wholesale energy prices- not what the supplier is selling it at. Whilst the market is usually a good indicator of what the supplier prices should be buying the energy for, it isn’t necessarily the price point at which suppliers will be selling it at. Make sure to check with your broker or supplier, as this week at Switching Group, we have seen supplier prices be slightly higher than what the market is reflecting.