Above average demand forces wholesale prices up

Above-average demand and dwindling LNG output propelled NBP gas prices higher on Friday.

The biggest moves beyond the prompt were posted on the December 24 front-month after the contract was jolted circa 2.3p/therm (0.08p/kWh) higher when compared to its previous close.

According to data from National Gas system demand reached approximately 238mcm on Friday, an increase of circa 6.5% when compared to Thursdays gas-day and 16mcm above the seasonal norm for that date. As it gets colder, the latest run of the 14-day model shows that demand is set to hold above seasonal norms until at least 24th November with a sharp increase expected moving into week 47 (from Monday 18th).

Consistently high demand, along with a quieter LNG schedule has meant that European storage reserves are being emptied at a much quicker rate when compared to last year. According to data from Gas Infrastructure Europe, continental/EU stocks have fallen sharply over the past week to 93.58%. This is lower than 4 out of the last 5 years on this date which could support the front-season contract (Summer 25) due to an anticipated increase in injection requirements ahead of next winter.

Some good news however as Hurricane Rafael ‘dissolved into a low pressure system’ over the weekend after slamming into Cuba as a Category 3 storm. This means that oil and gas infrastructure along the US Gulf Coast will be able to return to full capacity more quickly than expected after operators shut down facilities last week in anticipation of the hurricane’s landfall.

This morning, increases persist as the Summer 25 front-season contract is currently being offered circa 3.5p/therm (0.12p/kwh) above its previous settlement at time of writing, its highest level since mid-August.

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Price commentary courtesy of Crown Gas and Power