UK gas prices dropped last week on an oversupply situation. The weekend price dropped as low as 39 p/th on Friday. The oversupply situation was caused by increased flows from Norway and through the BBL, while the two-week maintenance on the Interconnector prevented exports. The curve was little affected with July prices still above 63 p/th. Storage injections rose sharply due to the price differentials. Volumes in store in the UK rose by 18% last week.
The NBP weekend settled at the equivalent of €15.7/MWh, representing a discount to TTF of €10.5/MWh, the widest premium since 2006. As the Interconnector returns from maintenance this week and NBP exports resume, the wide spreads will disappear.
NBP day-ahead and forward prices in p/th (Data source: Reuters/ICIS Heren)
Crude prices are dropping on bearish economic signals including worries over the Chinese economy and fears that the US Federal Reserve will scale back its monetary-easing programme that could give slower growth in oil demand. Brent crude was down by nearly 5% last week.
Chinese manufacturing activity dipped to a nine-month low in June raising fears the country could miss its growth target for 7.5% this year as Beijing is looking to rebalance the economy. Chinese oil demand has contributed to around half of global demand growth over the past decade.
Middle East tensions should prevent a continued drop in oil prices.