1) What’s happening in the markets and why?
Renewed concerns around LNG supply saw gas prices push up above 5% on the UK front month contract yesterday. Following Hurricane Beryl, the startup of the Freeport LNG export facility in Texas has been slower than the market had previously expected. With Europe now reliant on the global LNG market, traders remain acutely aware of potential disruptions. Freeport announced that one train will return to operation this week, but that the other two trains will be still ongoing hurricane repairs for an unspecified period of time. This seemed to be enough to trigger LNG supply side fears and push prices higher on Monday across the curve. Today feedgas data shows that Freeport LNG is already ramping up the first train, with flows averaging today at 12mcm/d and are still increasing which has seen prices push back slightly. Traders will continue to weigh the supply impact against fundamentals which are pretty comfortable right now . European stock levels are over 80% full, higher than usual for the time of year. Stronger renewable generation and steady flows from Norway have also helped to soften supply concerns.
2) What should energy buyers look out for?
Looking ahead, uncertainty over remaining Russian flows through Ukraine and the risk of a colder-than-normal winter will continue to dominate the market. At the end of August into September Norwegian maintenance will once again kick in and therefore energy buyers should continue keep a close eye on the Norwegian maintenance schedule.
3) What would you recommend?
Depending on your cover levels, taking some volume now given prices have eased to levels seen not seen for a few months, may offset any further risk premiums. However, if you have already taken a significant amount of cover and are comfortable you may want to hold off closer to delivery to try and capture extra value – this will be dependent on your risk appetite.
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