Following another turbulent fortnight, October has started with a much more bearish aspect. The biggest upward pressure on prices came following the discovery of suspected sabotage on the Nord Stream Baltic gas pipelines and then the Russian annexation of four Ukrainian regions. However, whilst the Nord Stream leaks have effectively incapacitated the pipelines, the fact they are not currently flowing gas means the upward market pressure was short-lived. Overall, there seems to be greater downward sentiment as we move into winter. There are early forecasts of a mild season, so pressure on gas will be lower. There are also very strong gas storage levels in continental Europe, where targets set in the summer have been smashed. At the same time demand destruction across the UK and wider Europe seems to be having a steadying effect. Gas flows from Norway are having a de-risking effect, and LNG shipments continue.

There are of course risks – the UK minimal gas storage is a concern as always, and French nuclear output is nowhere near normal levels moving into the higher demand months. Nevertheless, with good wind generation levels and reduced exports to Europe, UK prices are back to mid-July levels. Prices have probably also been helped by the announcement of the Government Price Cap – this has led to far more volume being secured into contracts and thus offers more certainty.

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