Last Friday, a dip in wholesale natural gas pricing occurred at the National Balancing Point (NBP). Increased supply and a reduced demand forecast was the cause of this. Friday saw key contracts stabilizing in comparison with the volatility seen on Thursday’s trading session. It is thought that the market levelled off due to the increase in Norwegian output and a disappointing predicted demand.
What does this mean?
Offshore operator Gassco revealed data indicating an increase in Norwegian exports. This contributed to the bearish sentiment in the market. Easington (UK) flow nominations surged 48% day-on-day, whilst maintenance at the Dvalin gas field also concluded simultaneously. Hence, this renewed increase in supply helped drive down wholesale gas prices.
Also, the reduced demand contributed to the decreased natural gas prices. A 14-day model suggests that the demand will remain below seasonal average, until at least the 20th of May, because of warm weather predictions.
Despite this, investors and traders who anticipated gas prices to rise regained control at the National Balancing Point the following morning. The Winter 24 front-season contract traded around 2.5p/therm (0.09/kWh) higher than its previous settlement, in turn, signalling a new and confident sentiment in the energy market.
Summary
To conclude, the events that have affected the energy market last week has been the mid May weather predictions reducing demand for energy, and an increase in supply from Dvalin gas field in Norway. Generally, the subsiding of natural gas prices at the NBP reflects how supply and demand plays such an important part role in the energy industry. The never ending fluctuations highlights the volatility in energy markets that comes from many factors, varying from weather predictions to maintenance issues.
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