Return to milder weather helps reduce pressure on prices

A return to milder weather along with strong British LNG supply helped to unwind weekly gains to NBP gas prices on Tuesday.

Morning trade saw gains to above 120p/therm before losing momentum and declining in the afternoon as forecast to drops in demand emerged as a key source of help.

According to data from National Gas, total system demand was expected to fall below seasonal norms for the first time since 7th January which may have in turn reduced the strain of Great Britain’s limited storage reserves and helped to curtail imports from Belgium and the Netherlands.

The latest run of our 14-day model indicates that demand will hold below seasonal norms for the next couple of days before dipping back to below average for the remainder of the period, albeit holding much closer to the typical seasonal range than we saw in the recent cold snap.

On the LNG front, the UK continues to attract vessels from all corners of the globe and the recent influx in diversions to Europe has likely served as a price floor for regional gas hubs amid looming geopolitical uncertainty and relatively low storage levels.

The latest shipping signals suggest that up to 7 vessels could arrive at the Milford Haven and Isle of Grain terminals by 24th January, helping to bolster short term (winter) supplies.

This morning, the NBP has opened a touch higher, with the February 25 front-month contract currently being offered circa 0.75p/therm (0.026p/kWh) above its previous settlement, as gas prices struggle to establish a clear direction.

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Price commentary courtesy of Crown Gas and Power