Traders continued to close their short positions yesterday ahead of the expiry of some near-curve contracts which offered support to the gas curve. However, demand levels were low across Europe due to mild weather, with residential demand in the UK dropping 30% below the seasonal norm, limiting the gains at the front of the curve.
Gas prices moved higher on Wednesday despite a bearish supply outlook, instead direction came from traders closing their short positions ahead of the expiry of some near-curve contracts. In terms of supply, demand is low due to mild weather, while LNG send-outs are comfortable. A rise in oil prices, on the back of the latest EIA report also offered support to the far-curve.
The UK gas system was short yesterday despite low demand levels, resulting in gains across the near curve. Norwegian flows were rerouted away from the UK due to a drop in Dutch output which was the main reason for the undersupply. Meanwhile, oil contracts increased and the Pound weakened against the Euro, providing additional bullish pressure on the far-curve.
Weakening commodity markets and a warm weather outlook for the rest of this week contributed to losses on the gas curve yesterday. Coal and emission contracts decreased but a late rebound in Brent helped to limit some of the downward movement on the far-curve. An outage at the South Hook terminal also reduced UKCS output and offered some support to the prompt.
Gas prices moved down during Friday’s session with bearish pressure provided by a weaker demand outlook and healthy LNG supply. The bigger losses were displayed at the front of the curve due to the milder weather forecast, while stable coal and oil markets limited the decreases on the far-curve.