1) What’s happening in the markets and why?
Last week the market reached highs not seen so far this year. Although prices have improved, we remain at the top end of the price range with Winter-24 gas in the UK still trading above £1/therm. This comes despite maintenance easing in Norway from their peak. Going forward the planned Norwegian maintenance schedule is lower in June and therefore should have negligible impact on price. Storage levels in Europe are also over 69% well above the 5-year average and are likely to be full ahead of winter. From a demand point of view the forecast is expected to improve in Europe with higher temperatures offsetting lower wind generation in the short term. However, risks around Russian supply into Austria following the OMV issue, strong Asian LNG demand and ongoing geopolitical uncertainty continues to mitigate any significant downside.
2) What should energy buyers look out for?
Energy buyers should continue keep a close eye on the Norwegian maintenance schedule, Asian LNG prices/demand levels as well as any further escalation in the Middle East and in Russia/Ukraine.
3) What would you recommend?
Depending on your cover levels, taking some volume now given the persistent volatility of late may offset any further risk premiums. 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 – this will be dependent on your risk appetite.
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