Wednesday 14 September 2016

Gas oversupply continues – Y Report

Gas oversupply continues – Y Report

Gas oversupply has continued this week due to strong flows from the UK Continental Shelf and Langeled through the weekend, according to Inenco’s Y Report.

This is in part caused by LNG send-out rising to 40mcm compared to around 20mcm a few months ago.

Tight power supply margins are forecast due to nuclear outages and renewable generation falling, said Energy Trader Dorian Lucas.

Oil saw a fairly strong sell off late last week and early this week as a result of US rig count increasing, "adding downward incentive to prices". However, they could rise when OPEC discusses production freezes at the end of September.

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Gas prices are trading lower, with contracts close to delivery pushed down to seven-year lows.

Power contracts close to delivery are trading much higher at the start of this week, with day ahead contracts trading at three-year highs.

Mr Lucas said: "Customers looking to place a fixed price contract should look to do so pretty soon. If we think about where the deadline for the October 16 signing is, we are approaching that quite quickly. The fact that prices have softened over the last number of weeks has also given opportunity to the customers who are entering a fixed price contract to do so a little bit cheaper.

"In terms of customers with flexible contracts it's down to attitude to risk again. Moving into Q4 there is potential for more downside. As we have mentioned the system is currently really oversupplied in terms of gas and that's expected to continue over the short term, which could see prices cheapen."

Written by

Bruna Pinhoni

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