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Our market view - week 27

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GAS

UK gas prices averaged 60.4 p/th in June, which is nearly 10% higher than in June last year. Third quarter gas demand marks the low point for seasonal gas use during the year, but low storage levels and supply concerns are supporting prices.
European storage injections were above normal in June, but will need to ramp up even more if winter markets are going to have a reasonable cushion. It is not likely that storage levels will enter winter anywhere near normal or 2012 levels, which will mean more risk associated with spot prices for the winter. The storage deficit will give limited withdrawal capacity, which will lead to price volatility if gas supply is disrupted during the winter.

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NBP day-ahead, monthly average in p/th (Data source: Reuters)

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European weather corrected gas demand (mcm/d) (Data source: PIRA)

OIL

Brent futures averaged 103.3 USD/bbl in June, equal to April and May averages.
The cuts in Iranian exports are offset by increased production in the US and in Iraq as well as substantial reserve capacity in some of the major OPEC producers such as Saudi Arabia. US and EU sanctions aimed at forcing Tehran to negotiate curbing its controversial nuclear programme slashed its crude exports to 700,000 bpd in May, the lowest in decades.


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