1) What’s happening in the markets and why?
Markets have continued to trade in its recent range with the UK and European gas contracts increasing over the last couple of sessions. Additional air-cooling demand due to the hotter weather across the UK and Europe as well as ongoing heatwaves in Asia increasing buying activity for LNG cargoes has supported the prices. The hot weather is expected to peak tomorrow on the continent and today in the UK. However, gas for power demand should ease over the coming days with higher wind speeds expected in both regions. Despite this and relatively stable supply the market remains concerned about the LNG picture and the price Europe will need to pay to compete for LNG over the coming winter. Egypt is seeking at least 17 cargoes to avoid outages with the tender results out today. According to the International Gas Union (IGU) the global LNG market has found a new but fragile equilibrium, following two years of volatility, due to lack of spare supply in the near-term.
2) What should energy buyers look out for?
Energy buyers should continue keep a close eye on the Norwegian maintenance schedule, Asian LNG prices/demand levels as well as any further escalation in the Middle East and in Russia/Ukraine.
3) What would you recommend?
Depending on your cover levels, taking some volume now given the persistent volatility of late may offset any further risk premiums especially Win24. However, if you have already taken a significant amount of cover and are comfortable you may want to hold off closer to delivery to try and capture extra value – this will be dependent on your risk appetite.
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