Market Drivers – December
Our specialists compile a Market Drivers report each month.
We have highlighted Bearish drivers, expected to contribute to the market lowering, and Bullish drivers, expected to contribute to the market going higher.
Bearish Drivers
– European storage forecast to end last year 61 TWh above the five year average
– January weather forecasts suggest higher than seasonal norm temperatures
– Soft UK domestic demand amid warmer weather
– Commissioning of two German FSRU’s adding to EU LNG regasification capacity in north West Europe
– North West Europe forecasts to end January above five year averages for gas storage
Bullish Drivers
– Risk of remaining Russian supply via Ukraine to be cut/reduced
– Lower Norwegian exports amid maintenances and outages
– Delay to Freeport terminal restart
– Changes to weather forecasts in the UK and North West Europe
– Risk of lower French nuclear output, despite the recent rise above 40GW EDF may once more lower the production forecast with problems galore across the ageing fleet
The last month of 2022 saw a general decline in prompt markets amid softer fundamentals. Having said this, the month ended on a bullish note with prompt prices moving towards the further dated contracts. This was on the back of colder weather across the continent and a week of snow which was seen in places in the UK towards the end of December.
Temperatures across Europe were also hit lending to the bullish sentiment seen in the UK. The cold spell didn’t last long however, and prices quickly returned to normal.
Storage levels in Europe ended the year around the 80%-85% mark, a bearish driver to end a very volatile year on. Demand was further disrupted over the Christmas period with warmer temperatures still resulting in a falling gas price in both TTF and NBP.
LNG cargoes into the UK and Europe were stable throughout December amid lockdowns in China resulting in more vessels available for other buyers.
Looking ahead, we turn our heads to 2023 and a new buying year, hopefully to be less volatile than 2022 however this is likely to remain the case as the war in Ukraine continues. In the short term, weather forecasts for January continue to be a heavy bearish driver for markets seeing gas prices plummet in the first week of the year.
It’s worth mentioning however that we are only at the beginning of the winter season, so there is plenty of time for the weather to change resulting as well as gas prices. Another thing for traders to consider is the availability of LNG cargoes into the new year with China’s lockdown measures easing.
Monthly Market View – November, 2022
Market Drivers – November
Our specialists compile a Market Drivers report each month.
We have highlighted Bearish drivers, expected to contribute to the market lowering, and Bullish drivers, expected to contribute to the market going higher.
Bearish
– Record high North West Europe stocks throughout December
– Weather outlook for the rest of December looks warmer than seasonal norms
– Commissioning of the first German FSRU in December adding LNG regasification capacity to NEW
– Forecast for higher production availability from Norway amid increase Kollsnes capacity
Bullish
– The implementation of the recent threat for remaining Russian supply via Ukraine to be cut/reduced
– Potentially further delay in Freeport restart
– Risk of changing weather forecasts over winter
– Risk of lower French nuclear output with outages now becoming more frequent.
Generally, markets saw mixed movements through November initially kicking off with substantial losses on the back of unseasonably warmer weather and high wind generation. The end of the month however saw a change in direction with markets closing the month higher than previous, this was amid colder temperatures forecasted for the start of December.
Temperatures across Europe have remained mostly above normal, curbing typical levels of commercial and residential heating demand. This has allowed storage to reach elevated levels. In recent days we have observed some withdrawals as winter heating demand commenced.
Storage levels in the EU are currently at 95% versus the five year average of 86%.
The flurry of LNG arrivals to the Atlantic basin continues to suppress curve contracts with Asian demand remaining muted.
Looking forward, the markets are going to be nervous to changing winter forecasts with traders keenly looking at this. The outlook for healthy storage stocks by the end of December provides a bearish price driver. We will be halfway through the winter and risk of storage shortage feared ahead of the winter should be heavily mitigated.