Prices have ticked up marginally from last week; however, there have been strong daily volatility moving gas prices up and down rapidly based on a number of factors.
The UK system has been short of gas supply over the last week with gas demand consistently higher than supply to the UK. The reasons behind this are mainly due to the outages on Norwegian gas fields. This impacted the market more towards the end of the week, as the expected completion date was extended until Monday 22nd May which caused a bit of panic in Europe.
Oil continues to show strength, climbing from $46.75 on 5th May to sit at $53.80 at lunchtime on Monday. The OPEC (Organisation of Petroleum Exporting Countries) production cuts were enforced in a bid to reduce the global surplus in Oil supply. These cuts look set to be extended in an official OPEC meeting in Vienna on 25th May. Throughout this week there have been numerous press reports which seem to indicate growing confidence in a deal being struck to extend cuts.
On Monday gas prices eased slightly as warmer weather revisions were made over the weekend and Norwegian gas supplies returned to Europe, although this was short lived as Oil strength took control of the market and lifted prices on Monday afternoon. On Tuesday’s open the prices have eased back as Oil price slides back towards the $53bbl mark.
Some other news worth noting is that 3 LNG vessels are expected to dock in the UK before the end of May which is a small boost to supply levels in the region and weather forecasts expected the rest of May to be warmer and drier than seasonal averages. Warmer forecasts tend to reduce the gas demand as heating demand reduces. It is expected that the first 30°C day could arrive this weekend, but I’ll believe it when I see it.
What specifically affected prices?
• Reduced flows – Langeled flows ramped down due to Norwegian outages.
• Oil price increases as we move closer to OPEC meeting on 25th May with extensions to the production cut expected.
• Warmer Temperature Revisions and lower demand forecast.
• Increased confidence in LNG cargoes to arrive before end of May.