Gas Prices Lower On Soft Fundamentals

Natural gas prices were lower across markets on Friday with Europe down 3.2% to EUR 29.87 after a high of EUR 31.59 early in the session. They are now up only 2.6% in May. Goldman Sachs expects prices to trade around EUR 30 over the summer. Even though demand is soft in Europe, the region remains vulnerable to supply disruptions globally and tensions in Russia/Ukraine and the Middle East are being monitored closely.

• Maintenance is in progress in Europe’s main producer Norway and any unplanned extensions will be watched closely. Elevated storage levels reduce the impact of any disruptions.
• US natural gas fell 2.1% to $2.25 but is still up 13.1% this month. It is currently lower at around $2.23. The outlook is for mild weather but also the previous week saw a smaller-than-expected inventory build. Prices are likely to remain pressured as there has been little need for cooling so far this season. The end to pipeline maintenance should ensure solid flows. Production as of Friday was down 1.2% y/y while demand was up 5.4% y/y.
• Asian gas prices also fell around 2% on Friday to be up 2.3% in May. Demand has improved in the region due to increased power demand for cooling.