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.”