This week has seen prices supported by lower temperatures, further Norwegian maintenance, and an announcement of the EU’s determination to phase out Russian gas imports.
Indeed, the European Commission said yesterday it will present a legal proposal in June to ban not only remaining Russian gas and LNG imports under existing contracts by end-2027, but also a ban on Russian gas imports under new deals and existing spot contracts by the end-2025.
Not surprisingly, talk of less Russian gas (not more) is stoking fear amongst market participants that replenishing storage over the summer could be more difficult than everybody was hoping.
Though it’s worth remembering that such an outcome would pave the way for more LNG coming out of the US headed for Europe…
Technically speaking then, Month-Ahead is now pulling away from the supporting trendline, with resistance above at around 94p/therm (please see chart below).
In other news, the EP (European Parliament) is voting to formally adopt the new storage rules that were trailed last month – if the vote passes, bearish pressure would seem likely (though not before some pre-vote volatility as market participants establish their positions (be it long or short).
On the supply side, LNG Canada has completed meaningful tests at its newest LNG plant and is currently planning to produce its first LNG in June.
UK temperatures are forecast to be back above seasonal norms by tomorrow (limiting gas-for-power burn, increasing the likelihood of storage injection).
On the trading side, clients running FLEX supply are encouraged to scale-in modest hedges over the coming days/weeks whilst the going’s good.
Whilst markets may still have further to fall as summer conditioning deepens, it’s worth remembering that current pices for Winter-25 (for example) remain at a 64% discount versus the highs of Aug ’22 – so prevailing comparative value is undeniable.
This month’s UK gas Day-Ahead averages are holding steady at 78p/therm (or approx. 2.6p/kwh excluding non-gas).
ELECTRICITY & CARBON
Electricity markets remain correlated to gas movements.
Winter-25 managed to break (very briefly) below £80/mwh last week – however, supportive drivers are preventing prices from breaking then consolidating below this key support level.
On the Carbon markets, correlation away from gas and toward equities seems cemented, with prices having broken above horizontal resistance and now testing the upper extremity of the bullish trend channel at £50.90/tn (please see chart below).
Today’s UK electricity generation mix is bullish in nature reflecting the low temperatures – with renewables contributing 21%, thermal at 34% (gas and coal) and low carbon at 27% (nuclear and imports).
So far this month, electricity Day-Ahead averages are holding steady at £70/mwh (or approx. 7p/kwh excluding non-energy).
On the trading side, clients running FLEX supply are encouraged to scale-in modest hedges over the coming days/weeks whilst the going’s good.
