Posted on: 03/11/2022
Sales Trader, Jean-Philippe Marty reports on last week's UK market activity (26th October – 2nd November 22).
Last week, the UK Government reinstated the fracking ban however forward prices were largely unaffected. Despite low wind forecasts, gas demand expectations remained below seasonal expectations. On 26th October The November UK Baseload contract closed almost flat day on day at £230/MWh but cleared as low as £222/MWh in the middle of the day. Well stocked European inventories now accentuating any bearish trend caused by additional inflows and milder weather, premiums remained in longer term contracts despite winter starting very warm and inventories remaining high.
On 27th October, we saw lower European gas prices and higher demand in Asia, encouraging LNG rerouting from Europe. The storage levels were high, and infrastructure is limited to process more LNG. At the same time Europe has received a large number of LNG deliveries earlier this year.
The end of the week saw TTF and NBP bounced back as weather forecasts seemed colder from mid-October. The price of LNG delivered to the Northwest of Europe dropped to a 14-month low amid less demand for port slots as ships remain at sea waiting for more favourable spot prices.
This week, power and gas opened softer amid higher Norwegian gas nominations to the UK and EU, strong LNG imports and high wind output. European gas storage is 94% full. UK storage is 100% full. The UK current storage level is at nine days, in comparison Netherlands has 123 days of supply. With the last day of October in delivery N2EX monthly price were £119.25/MWh, the lowest monthly price this year.
The majority of EU members have achieved their mandated 80% inventory levels and LNG shipments remain strong. Further positive developments at the key US LNG export terminal Freeport LNG indicate a resumption of exports soon with plans to be outlined this week. Further updates on Germany price cap strategy were provided yesterday which includes both a rate and a “usage” cap. Homes and small businesses power price will be capped at 40 cents per kWh for 80% of basic consumption whilst mid-size and large companies will be capped at 13 cents per kWh applicable to 70% of their previous year’s consumption.