leak at Norway’s Hammerfest LNG facility created a modest bounce in European gas prices

01 June 2023

Gas Market

European gas markets experienced an upward movement yesterday, driven by a production halt at a Norwegian LNG plant caused by a leak. The leak resulted in an impact volume of 18 MCM. It’s important to note that this facility had been on shutdown since May 4th and resumed operations on May 27th. Consequently, the market had already priced in the marginal impacted volumes by yesterday. Therefore, yesterday’s price movement serves as a reminder of how the market can quickly overreact to such events. In the afternoon, prices reached their peak before experiencing a late sell-off, as NBP contracts aimed to align with the fundamental market conditions. The front of the curve took the brunt of the upward push, with the July contract which gained front month status pushed 5.94p higher at 63.53 pence per therm.  

Power Market

Yesterday, GB baseload future prices reversed their recent bearish trend and entered positive territory. This upward movement was in line with the changes observed in the UK gas market. The Winter 23 contract gained 1.00/MWh to settle at 120.25/MWh while the front month June finished its last day of trading at 72.50/MWh, up 2.70/MWh day on day.  UK spark spread prices for Summer 24 remained negative at -£2.39/MWh. Baseload for day ahead delivery settled at £67.74/MWh yesterday. The EUA carbon market rebounded, taking support from the wider energy fuel mix. The Dec 23 contract opened at €80.48 a tonne and eventually closed at €80.71 up €0.16 tonnes day on day.  

Oil Market

Oil prices experienced a decline on Wednesday, as the front month closed $1.11 lower at $72.60 per barrel. The oil markets were influenced by the strength of the US dollar, which added pressure, coinciding with the advancement of the debt ceiling bill to the House of Representatives. The ongoing US debt ceiling drama has played a significant role in driving prices down in recent weeks. Furthermore, the weak Chinese manufacturing data extended the downward pressure on oil prices, as the global powerhouse faces challenges in reigniting its economy. It is worth noting that China’s position as the second-largest consumer of oil after the US further amplifies its impact on the oil markets. The West Texas Intermediate front month moved in the opposite direction, recording a gain of over 1%, settling at $68.50 per barrel.  

Markets this morning.

UK gas prices are attempting to reverse all of yesterday’s premium this morning, with the front month contract last trading at 57.00p, down 4.17p while Winter 23 last traded at 106.65 pence. The resolution of the leak at the Hammerfest LNG facility, which accounts for only 5% of Norway’s gas export capacity, is contributing to the downward pressure on UK gas prices this morning. The UK gas system is balanced this morning with demand forecast at 162MCM. Oil markets have opened higher this morning with a potential pause in US interest rate hikes supporting the upward sentiment. The front month contract last traded at $72.74 a barrel.
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