Weekly Market View – w/c 20th March, 2023
Market Drivers – February 2023
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– Strong likelihood that Europe ends the Winter 22 season around 50% full for gas storages
– Stable LNG cargoes to the UK with 14 expected to arrive over the next 10 days
– Milder weather forecast in the short term following the end to the winter 22 season
– Norwegian gas field planned outages over the next few weeks
– Ongoing concerns with the French Nuclear situation amid strikes and outages for repairs to the fleet
– Speculation over the weather for next winter season will add pressure to gas injections throughout summer 23
– Ongoing supply cuts via Ukraine continue being a bullish factor albeit less significant compared to last year
Prices throughout February traded for the most part bearishly towards the beginning of the months as warmer weather helped reduced gas demand. This was however challenged temperatures dropped seeing snowfall across parts of the UK towards the end of February/beginning of March. The markets largely navigated this cold spell unaffected and are now trading lower still. Wind generation has been below seasonal normal for most of the month, which kept prices relatively steady throughout.
Volatility through February was far less impactful compared to previous months with pricing slowly dropping throughout the month. Europe continued its search for a stable source of gas as Russia still has Nord Stream completely shut off. With a big maintenance month in Norwegian exports, we could see pricing rise in March. LNG continues to be a big player in current markets with UK and Europe trying to bring more cargoes in throughout the year.
Another month where strikes were prevalent across mainly French nuclear and LNG terminals. UK and European storage took a big hit during February, with UK going from 64% to 50% full and EU going from 72% to 61%. Although they are still well above fullness compared to this time last year. The pursuit of a new stable gas supply into EU continued, with LNG currently propping up the demand.
Looking ahead to the remainder of march and into the summer 23 trading season, we expect markets to trade range bound as many fear that resistance levels have been hit and the markets may struggle to give off much more value. The electricity and gas market pre COVID and Ukraine War traded below £100 per MWh and 100 p/therm respectively – the market now trades in the region of £120 per MWh on electricity and gas on average. This shows how much the market has recovered from the highs of 2022 where prices traded between £600 – £900 per MWH and p/therm.
French nuclear supply is likely to be a major driving force through summer 23 with strikes and outages due to repairs very much affecting the market at the moment. We will see bullishness from any unexpected changes in this regard. Summer 23 is also going to be a major season for gas importations to replenish Europe’s gas stocks ready for winter 23. Europe is now traded a reliance on Russian gas, a commodity far cheaper and reliable, for a dependency on LNG which will likely be where the shortfall now comes from. This opens up potential bidding wars for LNG cargoes with the tankers going to the highest bidder during a much shorter window.