There is a never a dull moment in the energy markets. Volatility has once again returned following UK and European gas prices falling to three-year lows. UK gas prices have increased over 20% in a space of a week and half back to levels not seen for a month, despite the market being well supplied. Why you may ask? Well firstly, cooler temperatures has increased demand, higher coal prices supporting gas and renewed concern surrounding US gas production. In addition to these, technical indicators and buying activity has pushed prices higher and in part speculative traders have been closing short positions. Without Russian piped gas volatility has become the new norm. Whilst there is still ample supply to meet demand, the fact one of three liquefaction units at a key U.S. liquefied natural gas (LNG) export plant, Freeport has been offline since late January and several U.S. producers cutting back on new drilling after prices fell, has been enough to spook markets. Some are questioning whether the markets have bottomed out, and even though no one can say for sure, what is important is not to be caught off guard, volatility is here to stay.
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