Tejal Shah, Head of Trading & Risk at Flagship Energy provides a market update
1) What’s happening in the markets and why?
This week we have welcomed April and the start of the summer delivery period. In a similar pattern to last year the gas markets have opened up lower amid warmer temperatures and strong renewable generation. The latest weather forecast has been revised higher in the UK along with higher wind speeds. The weaker demand levels and ample storage levels leaves the UK and Europe in a comfortable position for the start of the summer and injection period. Gas storage in the EU ended the winter season at 58.72% full, according to industry body Gas Infrastructure Europe. That is about 3 percentage points higher than the previous high, set last year. Many analysts are warning the EU may need to scale back imports of liquefied natural gas in the coming months to avoid capacity filling too early.
2) What should energy buyers look out for?
Energy buyers should continue to keep a close eye on the fundamental drivers. In particular, changes to the weather forecast, unplanned or extended maintenance and shifts in global LNG markets. Whilst the EU and UK demand may be lower for LNG at the moment, Asian demand is picking up and therefore to attract cargoes to our shore’s prices may need to pull higher.
3) What would you recommend?
Depending on your cover levels, taking some volume now still represents good value. However, if you have already taken a significant amount of cover and are comfortable you may want to hold off closer to delivery to try and capture extra value.
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