Flagship Energy’s Tejal Shah Energy Markets Update – 22nd May 2024

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Bullish momentum continues in the UK and European gas markets. Markets started pulling up towards the back end of last week on anticipation of a full shutdown of the Troll field and Kollsnes processing plant in Norway this Tuesday. The main concern was the timely return of these assets due to historical instances of delays, extensions etc. Despite flows ramping up this morning from Kollsnes with total Norwegian exports to the UK and Continent up, the bearishness was short lived. UK Winter-24 gas is now trading above £1/therm, a level last seen towards the back end of 2023.

Reasons for continued support in the market include increasing Asian LNG demand due to the onset of a heatwave as well restocking ahead of the summer, whilst disruptions at facilities in Malaysia and Australia are tightening the supply picture. Asian spot LNG prices rose to the highest since late-December. However, with prices this high, alternatives are now more cost-effective in emerging markets, casting doubt on demand levels. Elsewhere in the US, market participants were also pricing in a delay in the Exxon Mobil/QatarEnergies’ Golden Pass LNG export plant in Texas when their contractor filed for bankruptcy on Tuesday which could delay the project.

Traders also remain alert to potential supply interruptions as geopolitical tensions simmer.  Earlier today Austrian oil and gas group OMV said that gas supplies from Russia’s Gazprom may be suspended in connection with a foreign court ruling, without identifying the case. Gazprom has typically shipped around 40 million cubic metres of gas a day via Ukraine transit routes in 2024 with around half of this gas going to Austria via pipelines through Ukraine and then Slovakia. Although OMV said it will be able to supply its contractual customers with gas from alternative sources because it had diversified its supply base with other origins, such as Norway, and with LNG from the world market, the market remains spooked.

On the fundamental side lower renewable generation over the coming days was proving near term support, whilst all other factors remain relatively stable.

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