Small Business Market Update Tuesday 28 May 2019


What has happened to Gas prices this week?


UK gas prices have traded within a small range over the previous fortnight, however some events caused some short term volatility.


Throughout the course of the previous 2 weeks, the BBL has been offline whilst preparations continue to ensure bi-directional flow between the UK & Netherlands.


Temperature outlook was forecast to be at and just below seasonal normal, with below average wind generation helping to support the front of the curve. As we moved throughout the month, temperatures picked up, climbing above average and solar radiation levels also picked up. This helped to suppress gas demand in the UK system. The UK system remained well supplied for the majority of days in the last 2 weeks with a plethora of LNG cargoes continuing to arrive on UK shores.


Norwegian flows into the UK were severely restricted throughout last week with Troll Field, Kollsnes & Gullfaks all offline for yearly maintenance. This took 54mcm of Norwegian gas flow offline sending Norwegian flow into the UK down to just 15mcm. The impact of this was muted by increased temperatures and weaker demand across the UK bank holiday period.


On 22nd May prices spiked, following news breaking about another earthquake in the Dutch province of Groningen, located close to the Groningen gas field (Europe’s Largest). Production cuts have enforced on this field in recent years to reduce the number of seismic events after health and safety concerns were raised by residents. Fears of a further cut sparked panic in the market with a significant shift upwards in the afternoon.


The news of Groningen hit the market when Carbon EUA’s had climbed sharply following days of losses in which the commodity had fallen below €25 for the first time in a number of weeks. A weak auction result and large selling transactions pushed the price downwards, before retracing back above €26.


Oil prices have been volatile with a significant shift in prices during the previous week. Firstly, prices lifted above $75/bbl. following reports of Drone attacks on Saudi Arabia Oil infrastructure. Two pumping stations on the Saudi Aramco pipeline were attacked by drones carrying explosives. With the US sanctions on Iran taking supply off grid, the attack sparked fears of further supply cuts. Only a matter of days after this, Oil prices shot down, as the US/ China trade war continued to make headlines, with reports emerging of a slowdown in global demand. The prices were further pressured by unexpected climbs in US stocks.


Temperatures are set to be slightly cooler than average for the first half of this week, before the outlook turns warmer into the weekend.


Brexit and the EU elections will continue to impact the gas market, especially as volatility in FX rates continue with Brexit uncertainty pushing the GBP down to new lows against the Euro.


Small Business Market Update Tuesday 28 May 2019 – Outlook


What specifically affected prices in the past week?


Bullish factors (upward pressure)


  • Oil Infrastructure Attacks
  • Carbon Emissions Climb
  • European Gas Maintenance
  • GBP Weakness (Brexit uncertainty)
  • Groningen Gas Field Issues


Bearish factors (downward pressure)


  • Warmer Weather
  • Lower Gas Demand
  • Higher Renewable Generation
  • Continued LNG Supply

Small Business Market Update Tuesday 28 May 2019 brought to you by British Utilities

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