LNG supply concerns lift European gas prices

10 August 2023

Gas Market

NBP futures had one of their most volatile days in 2023 as workers at Woodside Energy Group and Chevron’s liquefied natural gas (LNG) facilities in Australia voted to strike on Wednesday, which could lead to a more competitive market for global LNG. Collectively, monthly exports from the facilities equate to around 11% of LNG exports globally. A drop in wind generation forecasts across Europe over the next 14 days added to the upward pressure. The front month September contract traded as high as 110.47 pence per therm in the early afternoon, which was over 32p higher than the low of the day of 78.18p, eventually settling at 101.08p, an increase of 22.94p over the session. On the prompt, the Within day and Day-ahead contracts settled 22.05p and 19.45p higher day on day respectively.

Power Market

GB baseload contracts tracked the sharp increase in the UK gas market on Wednesday due to global LNG supply concerns despite marginal losses in both the EUA and UKA carbon markets. The front of the curve had the largest increase day on day, with the September contract settling at £93.00/MWh, up £14.75/MWh on the day. The EUA Carbon Dec-23 contract settled relatively flat on the day despite prices rising by more than €2 a tonne in the morning after the Commitment of Traders data showed that Investment funds had decreased their net long positions.

Oil Market

Brent crude oil traded at its highest price since January after a steep drawdown in U.S. fuel stockpiles offset concerns over slow demand from China. A government report showed U.S gasoline stocks fell by 2.7 million barrels last week, while distillate inventories dropped by 1.7 million barrels, compared to forecasts of little to no drawdowns for both. On Tuesday Saudi Arabia’s cabinet reaffirmed its support for precautionary measures by OPEC+ to stabilize the market. Saudi Arabia plans to extend its voluntary production cut of 1 million barrels per day for another month to include September while Russia also said it would cut oil exports by 300,000 bpd in September which has helped support prices to the recent highs. The Brent front month October contract settled at $87.55, an increase of $1.48 a barrel over the session.

Markets this morning

NBP futures released some of the premium gained from yesterday’s session this morning as talks are currently being held between Chevron and Woodside Energy group with unions to prevent the strikes at LNG facilities in Australia. The front month September contract traded as high as 106.74 pence per therm but is currently trading down 6.61p at 94.47p. Further out the curve, the Winter 23 contract has yet to trade but the Summer-23 contract is trading down 4.08p on the session, retracing approximately half of yesterday’s gains. On the prompt, the Within day and Day-ahead contracts are trading down 7.00p and 4.00p respectively as the UK gas system has opened oversupplied this morning.  
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