Gas prices up amid increasingly tight supply constraints

Gas prices resumed its upward trajectory on Thursday amid an increasingly bullish demand outlook and continuing Norwegian supply constraints.

The biggest moves were this time posted on the June 24 front-month contract, which was jolted 0.09p/kWh higher when compared to its previous close following upward revisions to demand forecasts.

Expectations of unseasonably high demand in the first half of June likely played into the bullish sentiment. The latest run of our 14-day model shows that levels will fluctuate to below and above seasonal norms over the coming weekend before settling above average from 4th June until at least 12th June, aggravating already tight Norwegian and LNG supply fundamentals.

Prolonged summertime maintenance across the NCS (Norwegian Continental Shelf) and resulting tightness means that unplanned outages have an amplified effect on sentiment, data from offshore operator Gassco shows that 5mcm was removed at the Kollsnes gas processing facility on Thursday. This particular outage (which has been ongoing since 23rd May) was yesterday accompanied by extensive planned maintenance that totalled 63.6mcm across the gas-day.

In other news, Sweden has indicated that it is willing cease imports of Russian LNG without financial support from the European Union. New measures were approved yesterday that will allow member states to voluntarily block Russian seaborne gas imports. A new package of sanctions aimed at cutting Russia’s LNG revenues had failed to pass after being vetoed by Hungary who is still very much reliant on Russia for the bulk of its gas imports.

Gas contracts are relatively unchanged on Friday morning, with most being offered very much in line with their previous settlement.

If you want to see more information on the wholesale market trends subscribe to our weekly report here.