The system tightened yesterday due to cold temperatures, resulting in bullish movement across the near-curve. Gains were also visible on the far-curve but the upward movement was capped by falling coal and oil markets. However, coal prices could increase significantly if Colombian workers go on strike due to a wage dispute.
Gas prices decreased during Monday’s session as the current cold spell is only expected to last until the weekend and the impact on storage levels should be minimal; a mild January has kept storage levels above the seasonal norm. Contracts further along the curve were pressured down by losses on the oil market, with bearish sentiment provided by an expected rise in global interest rates.
Gas prices climbed higher on Friday as a significant drop in wind levels and cold temperatures were expected today, increasing demand levels. IUK flows improved slightly and this helped to balance the system. Meanwhile, oil prices strengthened and this helped contracts on the far-curve close at a premium.
The short-term weather forecast points to colder temperatures over the weekend and the start of next week which helped towards gains at the front of the gas curve on Thursday. Brent and coal markets stabilised somewhat but the majority of far-curve prices still climbed higher.
A downward revision in temperatures for the next 7 days helped towards some increases on the near-curve yesterday. The upward movement was limited by strong wind levels which reduced CCGT demand and resulted in an oversupplied system. Meanwhile, coal shed from its price and oil stabilised, restricting gains at the back of the curve.