EVI-g hits record high as gas price collapses

The Energy Volatility Index for wholesale gas, EVI-g, has hit a record high of 120%.  This is almost 50% higher than at any time since the Index began in 2015.

EVI-g_record_high

This morning, prompt gas contracts are trading lower, amid an oversupplied UK gas market. The intraday system is c.25mcm long, with high LNG nominations, coupled with healthy UKCS supplies. Total NBP supply is nominated at c.213mcm, with UKCS, NCS and LNG comprising the majority of flows at c.101mcm, c.52mcm and c.44mcm respectively. Britain to Belgium gas flow via the interconnector is currently  high and forecasted at c.56mcm, with British prompt contracts falling at a faster rate than its Belgian equivalent, incentivising exports.

Further out, forward gas contracts are trading lower, with weakening Brent crude markets. Brent currently trades below $47 per barrel, with dimming prospects of the world’s largest producers agreeing to a production freeze. US production has also shown signs of  increasing, with the rise in the number of drilling rigs over the last three months.

Triad Season 2015-2016

The Triad demand season has started!

The National Grid Triad demand season has started and that we’ll be sending our cliennts alert and cancellation communications over the next few months. To sign up email info@energybrokers.co.uk or visit our Intelligence area.

When we think that there is likely to be a Triad reached on a day we’ll send you an email alert with the date and time of the peak demand. If you are on a pass-through contract and are able to reduce your demand at this time, you can potentially save on the cost of National Grid transmission charges. If conditions change we’ll send you an email to cancel the alert.

What are the Triads?

Triad is the name given to the periods of maximum demand during November to February each winter. This is known as the ‘Triad Season’.

National Grid takes three periods of the highest demand during this time, which have to be separated by at least 10 days, to calculate the Transmission Network Use of System (TNUoS) charges. These are typically between 5pm and 6pm and only apply to half hourly metered sites.

View from the Energy Traders

“Given the dark clouds descending on London today, I was a bit surprised to see gas demand open up at 223MCM, which was a bit lower than forecast yesterday for today. It seems that exports are a little lower at 15MCM, temps are set to increase on the continent, but remain no better than seasonal norm for the foreseeable future in the UK. Yikes.

Interestingly Rough curtailed withdrawals last night for commercial reasons according to the operator, it’s not flowing this morning with Aldbrough and Holford having to contribute reasonable volumes to keep balance, with the latter switching off late morning and sending the system short. I’m probably now broadly neutral on the front month valuation, there will however be an LNG delivery on May 6th into South Hook, the Shagra, to watch out for. 219MCM the gas demand for tomorrow at the time of writing.

I also set my cards out on the curve this morning, with surprisingly, a short term bullish note during our morning desk chat – yes I am happy to buy it when needs must – on the premise that U.S. GDP would disappoint given the recent bout of poor earnings data, lacklustre jobless claims / housing data etc.

Anyway, into the afternoon session and a low ball GDP score of just 0.2% vs. 2.2% previously was enough to continue the €/$ ascent. In response, Brent showed little reaction to the weakening dollar though, hmmm, our energy curves just a tad up also. I guess players waiting for final confirmation out of the Fed later tonight. In the meantime though, Interest Rate traders are now pricing a U.S. rate hike now pushed back to Dec.

Elsewhere of interest, EZ lending was up in March, the first rise in 3 years, API stocks data last night returned a build on crude, but inventories at Cushing declined for the first time this year. The EIA stats this afternoon confirmed the draw at Cushing, WTI above $58 at the time of writing, now we are starting to motor, with our seasonal contracts now dealing up.

Potentially putting a dampener on proceedings the Iranian Foreign Minister stated that Iran and the 6 world powers will start drafting work on the final nuclear agreement this Thursday with the aim to get a final deal before June 30 deadline. Something to bear in mind.

Holford has switched back on now late afternoon to balance up proceedings; important news out on carbon that EU member states have provisionally agreed that carbon market reforms should start in 2019, further negotiations expected in May. “

The view from the Energy Trading Desk

“Well we mentioned last week that there was a bout of colder weather on its way, daytime it’s pleasant enough but the chilly evenings have resulted in demand ticking back up above the 200MCM mark, the system is a bit short in consequence although LNG and Holford have both notably stepped up, whilst Rough also flicked on into the afternoon session – given the w/d premium to the front months, a veritable no brainer.

I’m hoping that that is it now in terms of recent price ascensions and touch wood it does indeed seem to be the case now at the close; note Troll is also back from tomorrow, perhaps resulting in that May contract getting sold down. In truth it’s been hard to work an angle further out on the curve, with widish spreads the order of the day. Brent opened up marginally higher following another drop in the rig count stats posted late on Friday, but the NBP has been fairly lacklustre, only on a bout of dollar weakness and Brent subsequently heading towards a day high of $65.61 did it allow me to pick off some bids on the seasons.

So I’m still bearish out there – I mentioned last week the NBP fundamentals look fairly weak, so despite upwards moves on Brent, in reality I think it’s better to focus on this, as markets otherwise seem rather disconnected of late. There is perhaps just too much (economic) uncertainty out there at present, consider today Greece optimism, will this be short lived? Sterling hit a 7-wk high on the back of latest poll readings giving the Tories a 6 point lead, can they hang on to it? Elsewhere this week the FOMC, U.S. (and UK) GDP reads are all high risk events. You can also add in BOJ and RBNZ rate decisions and some Chinese investor exuberance to the plot.

Sticking with the fundamentals theme to wrap up – an interesting article in the press on the commute this am, stating that the U.S is set to launch a “blitz of gas exports” as soon as this year… “

View from the energy trading desk

“Gas system balanced around the 197MCM mark – 10MCM below SND, bit more vol through Langeled as maintenance at Dunkerque redirects some continent bound flows. Troll back on the 28th should in any event boost throughput here and also trim IUK exports by the same measure. Still bearish here.

The outlook also unsurprisingly remains fairly dire in the EZ with Mfg. & Services PMI data underwhelming this morning, although to be fair Sterling also took an early bath after disappointing Retail Sales data. Energy curves thus a bit softer on the open also.

You may be sensing already that its really been a day where macro events have taken centre stage in providing sentiment to our markets. Over in the U.S. equity indices yesterday closed in positive territory, big names such as Amgen and Coca Cola topped estimates, Boeing, McDonalds and Yahoo all but dazzling, a sign of things to come with jobless claims data in the afternoon rising for the third straight week and U.S. Mfg. PMI data also falling more than expected in April.

With little news and views out on Greece, €/$ reversed the PMI induced morning losses, whilst headlines that a Saudi led coalition had resumed bombing of Yemen also spurred Brent on by a couple of dollars (despite another news snippet that OPEC are currently pumping almost 2Mbpd over demand) to hit a day high of $65.13.

Yikes, how did we get there so fast, I hear you ask, not to worry, it seems that weak market fundamentals on the prompt is the main driver of late with ill-gotten afternoon gains thus sold into at the close. I joined the crowd offloading some more W15, but for once donning my buying hat picking up a bit of S16 as a hedge. Have to play it from both sides sometimes.

Late mkt news, Eon have signed a deal to buy 2Mn tonnes of regasified LNG/ yr for the next 20 years, also a sign of things to come…”

View from the trading desk

“The gas system and linepack have remained short all day but this has provided little support to gas pricing. Gas contracts across the curve opened higher this morning with buoyant oil pricing but have fallen throughout the day to make their lows at the time of writing. The front month NBP contract is off circa a penny from the open at 45.25p while the benchmark Winter’15 contract is off 0.6p at 50.61. There is an obvious technical floor for the Winter’15 contract between 50.5 and 50.60 since the start of the month – any close below this narrow zone would be significantly bearish.

BBL flows from Holland have remained at zero throughout the day while Langeled flows from Norway are in line with flows over the last 3 days at 17 MCM but one might typically expect closer to 25 MCM during the Summer. UK North Sea flows remain steady while South Hook LNG flows continue to ramp up from the start of month levels to 24 MCM today with 2 further cargoes on the horizon in the coming week.

Oil continues its uptrend since mid-January with the May Brent contract triggering further technical buying as it broke through the $60 level before expiry yesterday evening with further front month upside coming from June’s contango to the previous month. Brent is currently at $62.70, yesterday’s positive Chinese oil consumption figures providing support. Today has been quiet news wise for oil.”

View from the energy trading desk – 15th April

“There was marginal volatility on the UK gas market today as supply demand forecast for the Day Ahead contract points to rather sideways price direction.

The decision of Dutch court  to  halt production only  for Loppersum field, where production was already limited to 3bcm a year, moved NBP prices strongly down yesterday. Prices today corrected slightly upwards as demand for coming days was revised upwardly and IUK flows to continent remained above 30mcm- unusually high for this time of the year. However, increase in UK Continental Shelf flows and higher LNG input limited increase in prices on the prompt.

Further along the curve, contracts have pushed into positive territory, influenced by current strength on Brent crude.

On the power market the Day Ahead contract firmed this morning as wind generation is expected to fall. On the near and far curve contracts have firmed with support coming from equivalent NBP contracts that in turn were supported by rising price of Brent.

Oil prices have gained for the last five consecutive trading sessions, helped by signals of peaking U.S. oil production.  EIA (Energy Information Administration)  increased its forecast for 2015 global oil demand growth by 90,000 bpd to 1.08 mbpd while also decreasing  its estimate of 2015 US crude production growth by 50,000 bpd to 550,000 bpd. Interestingly, it has left the forecasted 2015 call on OPEC unchanged at 29.5 mbpd, while March production was estimated at 31.5mbpd. Adding to bullish sentiment OPEC recently hinted that it was open to a collaborative cut in production with non-OPEC producers. Today Russia’s Deputy PM has announced that he was holding “unprecedented” talks with the cartel but did not go into further detail. In the meantime, Chinese oil demand rose by 7.6% last month according to Reuters. However, Chinese economic growth slowed to six-year low of 7% in 1Q 2015

Jun-15 Brent contract, which is trading above $60 per barrel will be a front month contract from tomorrow. It closed above 100 day moving average yesterday  for the first time since Jun-14   and advanced further north after EIA data showed smaller than forecast built in crude inventories and greater draw in gasoline stocks, but built in distillates exceeded expectation. Second consecutive close above 100 MA has potential to unleash the market higher.”