What’s happening in the markets and why?
Did we say calm and stable last week? Well, what a turnaround it has been. Geopolitical events with violence in the Middle East causing a halt in gas exports between Israel and Egypt, damage to the BalticConnector gas pipeline between Estonia and Finland and the confirmed strike date in Australia has increased supply risk and added significantly to the upside. The forecast of a cold spell over the weekend and lower wind has also added to bullish momentum.
The supply impact from the outage at BalticConnector should be limited as its capacity is ~7mcm/d. Storage in Europe are at their highest in 5 years at 97% capacity and Norwegian flows are expected to increase as the yearly maintenance comes to an end over the next week. However, with the market already quite nervous, sentiment is likely to drive the market, especially if the damage on the BalicConnector is confirmed as deliberate. As ever there is a never a dull moment in the energy markets.
What should energy buyers look out for?
It’s worth keeping a close eye on the developments mentioned above. Any deterioration can move prices negatively and quickly as we have seen in previous years.
What would you recommend?
Review your positions if you have left volume open in the winter season. Looking forward to next year, depending on your risk appetite you may want to consider taking some cover.
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