Wholesale prices increase amid supply concerns

Gas prices rebounded at the NBP on Thursday amid potential threats to Eastern and Central European supplies.

Ongoing near-term supply concerns added to the pressure, with substantial gains of circa 5.5p/therm (0.19p/kWh) posted across the near-curve, and both the front-month and front-season contracts surging to levels not seen so far this year.

News broke during yesterday afternoon trade that Austria’s OMV, who won an arbitration reward totaling more than £200 million against Russia’s Gazprom earlier this year, could reclaim the sum by refusing/reducing payments to the Russian energy giant. The current transportation agreement for Russian flows via the Ukraine is set to end on December 31st but this news could serve to bring that date even closer.

European storage levels have taken a battering recently amid a sustained period of cold weather and below average wind output and such a disruption to pipeline flows could worsen the already tight supply and demand balance.

There is a general consensus that payments to Gazprom’s export arm are typically due around the 20th of each month so the next few days could serve as an important gauge of how both parties intend to interact between now and the end of the year.

As previously stated, European storage levels are struggling to keep pace with recent years. According to the latest data from Gas Infrastructure Europe, EU facilities are currently at 92.1% full, which is just over 8 percentage points below the same date last year (98.29%) with current levels barely holding above the 5 year average of 91.9%.

This morning, gas prices have opened at a slight discount, with the Summer 25 front-season contract currently being offered circa 0.75p/therm (0.026p/kWh) below its previous settlement at time of writing.

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Price commentary courtesy of Crown Gas and Power