Gains from first half of October wiped out across Annuals

Monday 4th November 2019

Both gas and power markets have fallen back over the last fortnight. In spite of some upward pressure from higher carbon and oil prices, sentiment has been predominantly bearish. Short-term markets have generally been suppressed, with good wind output and plentiful LNG deliveries. The rise in sterling versus the euro and US dollar on the back of the (near) Brexit deal equates to cheaper UK imports, weakening prices further. At the same time, we have seen improved weather forecasts for the coming winter, suggesting demand will be down.

Probably the most significant influence on the direction of markets is the abundance of gas in storage across Europe, currently at 98% fullness. This has started to affect Summer ’20 prices, with the April ’20 gas Annual showing the steepest falls. With so much cheap Summer ’19 gas in storage, the likelihood of Winter ’19 replenishment diminishes, so price rises are less likely. Should the coming winter remain relatively mild, so there may still be significant gas left in storage next summer, with the obvious knock-on to 2020 replenishment.