The UK gas system is long, according to Inenco’s Y report.
That’s because supply has increased this week due to maintenance works on both the UK and Norwegian continental shelf which have now been completed.
Dorian Lucas, Energy Analyst said: “We’ve seen quite a lot of LNG throughout the remainder of August, approximately one cargo a week and further to this going forward, we are expecting to see more supply in the system as Rough, our key storage in the UK, is moving to single train injection.
“What that means is that the amount of gas we can put into Rough storage on a given day is reducing. They can only put in around half as much on a daily basis going forward. That means there is going to be excess gas in the system going forward.”
On the other hand oil prices are still decreasing close to January low levels.
Mr Lucas added: “The reasons for this are predominately OPEC production is remaining close to record levels. Further to this Russia is remaining quite high with production as well as the US. We’ve seen US oil account increase, with an extra 32 rigs online in the last three weeks. That is a direct result of improved efficiency in shale oil extraction and they can operate at a lot lower running cost.”
He believes customers looking to place fixed price contracts should do it as soon as possible.
He said: “You need to make sure you enter the market by the end of August, early September at the latest. When you do that you will achieve the bottom of the market price and a really good position going forward.”
Customers on flexible contracts with “quite heavy hedges” should wait to see how the market goes forward.
Mr Lucas added: “For those who’ve got quite high exposure, they should probably take a little bit of risk management.”