Natural Gas Prices - Page 9

In April, the NBP saw fairly marked fluctuations, ranging from +18% to -10% compared to the monthly average. In a temporary surge, it exceeded €15/MWh ($5/MBtu) on April 26 and 27. A situation of momentarily sustained demand coincided with deficiencies of supply, resulting in heavy recourse to storage. However, monthly averages have been more stable since February, between €12.7-13/MWh ($4.2-4.3/MBtu). The price for early May and the forward quotations for the summer months (until September) stand at about the same levels. Obviously, lower prices cannot be excluded, in light of the market equilibrium conditions. On April 11, the price fell to €11.5/MWh ($3.9/MBtu), its lowest level in recent months, in step with the conditions prevailing on the LNG market in Europe at that time.

The winter season for the gas industry (October 2015 to March 2016) closed with the NBP price very low at €15.4 /MWh ($4.9/MBtu), which is 30 to 46% lower than for the three previous winters. The downtrend that started in early 2015 resulted from a relatively abundant supply and a decline in the prices of contracts 100% indexed on oil. In fact, these prices defined the NBP trend. The decline continued in the first April quotations (-8% compared to March) as the NBP dropped below the €12/MWh ($4/MBtu) mark. The markets are expecting a minimum price of €11/MWh ($3.7/MBtu) during the summer. The fact that the volumes stored in Europe are relatively large partly explains the absence of price pressure.

In the first few days of March, the NBP was quoting at about €13/MWh ($4.2/MBtu), close to the previous month’s average. These levels are extremely low. Not since April 2010 (euro prices) and October 2009 (dollar prices) have such low numbers been recorded. The monthly average hit rock bottom at €7.6/MWh ($3.3/MBtu) in September 2009. The markets are not anticipating prices to drop that much next summer, but a series of decreases from the current levels to the vicinity of €11.8/MWh ($3.9/MBtu). For next winter, the NBP is expected to reach $14-15/MWh ($4.6-5.0/MBtu), in line with contracts 100% indexed to oil. This convergence indicates that the market deems $4.6-5/MBtu to be the lowest equilibrium threshold tenable in an average winter.