Flagship Energy’s Tejal Shah Energy Markets Update – 31st January 2024

Tejal Shah, Head of Trading & Risk at Flagship Energy provides a market update

Following a bearish start to January we have seen the UK and European wholesale gas markets becoming more cautious this week leading to some risk premium being added to prices. The European front month gas contract surpassed €30/MWh for the first time in two weeks.

Whilst Europe is well supplied, the latest weather forecast is now showing colder than normal for the second half of February which is leading to some gains on the near term however events in the global market appear to be more of a concern.  Short term disruption to liquefied natural gas (LNG) supplies as well as tensions in the Middle East are the driving factors.

Last week the US announced the Freeport LNG export terminal will have one of its three trains closed temporarily for maintenance, lasting a month. With the US exporting a large amount of LNG to Europe, we are becoming more price sensitive to these outages. Meanwhile the White House is also pausing approvals of LNG export projects to analyse their impact on climate change, the economy and national security. Whilst the latter may not have an immediate impact if this issue persists, it could affect the LNG security globally. Not only this but attacks by Iranian-backed Houthi rebels on commercial shipping have already diverted LNG tankers away from the Red Sea to take the longer route around Africa. In addition, the market is waiting for a US response to the drone assault on their personnel in Jordan over the weekend. President Joe Biden said he has made a decision on how to respond, without elaborating, adding that Iran was responsible for providing the weaponry used in the strike. With fewer tankers potentially headed to Europe in February the colder temperatures could tighten the market.

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