Gas prices moved higher on Tuesday with support coming from rising coal and power markets, with an expected drop in temperatures next week also a factor. Meanwhile, Langeled flows were lower due to an unplanned outage at the Nyhamna processing plant which led to a tighter UK gas system, despite weak demand.
UK markets were closed yesterday due to the bank holiday but the majority of contracts ended Friday’s session at a discount. Warm weather over the weekend helped to reduce demand levels as expected, while the outlook for oil was bearish following the OPEC meeting. In terms of supply, exports via the IUK pipeline were very strong, helping to weigh on European prices.
The morning session was generally stable but small losses were recorded in the afternoon following a drop in oil prices and a warm weather outlook for today. A number of LNG deliveries are also expected to dock in the UK in the coming days and helped to counter the effects of a short system.
It was announced yesterday that production at the Groningen gas facility would be cut by 10%, falling from 24bcm to 21.6bcm; additional restrictions will also be placed on output in colder years. This news offered some support to the curve later in the session but a warm weather outlook and the expected arrival of LNG deliveries in the coming week helped to restrict any gains.
Gas prices initially opened at a discount but rallied higher throughout the session on the back of stronger coal and oil markets. Meanwhile, the UK gas system was oversupplied following a rise in Norwegian flows and improved LNG send-outs at the South Hook terminal, weighing on the prompt. The market now awaits Thursday’s OPEC meeting, while on-going issues in Australia helped APi2 coal to hit its highest price since October 2014.