What’s happening in the markets and why?
The first of October marks the official start of the gas winter season and it’s been some start. Market confidence has improved with Norwegian supply increasing following a heavy maintenance period, European gas storage hits over 96% fullness and both in the UK and the Continent temperatures remain above seasonal normal levels weighing on demand. For the time being, gas and power markets look calm and stable resulting in the NBP day-ahead easing by 25% over the last few sessions and with intra-day movements not seen since early August.
The current situation was also emphasised in National Grid’s winter outlook where the risk of blackouts in the UK is expected to be lower this winter than year ago when Russia’s invasion of Ukraine had left officials scrambling. We are however not out the woods and its worth not getting complacent. Gas demand is still down on pre-crisis levels but any new supply disruption or a very cold winter could still trigger the threat of gas shortages. As seen over the summer period any negative news regarding LNG supply or extension to maintenance the market will react quite sharply.
What should energy buyers look out for?
If volume has been left open into the winter season, it’s worth keeping a close eye on the supply/demand fundamentals. As mentioned above we are in the winter period, any deterioration to the weather forecast, potential supply disruptions and how storage withdrawals are affecting overall capacity can move prices negatively.
What would you recommend?
Looking forward to next year, with the recent drop off, prices for next summer are starting to look attractive and could be worth increasing cover levels depending on risk appetite.
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