Gas market – Oil pushes gas prices up from the start of this week
Gas prices fell last week for the front contracts. Milder weather forecasts and the conclusion of a large maintenance project in Norway have led to a better gas balance, sending the front lower. This includes the year 2019 contract.
Oil rose last week and broke through the USD 80/barrel resistance level. Breaching USD 80 opened the way for more upside, and it rose almost USD 4/barrel during the week before closing just below USD 83/barrel. This helped support the gas contracts later in the curve, and 2021 ended the week marginally higher.
Oil has continued to rise from the start of this week, and is currently trading at around USD 85/barrel. This has created enormous buying interest in the long-dated gas contracts (2020 and later), which continue to be lower priced than 2019 (2020 is cheaper than 2019, 2021 is cheaper than 2020, etc.).
It is uncertain how high oil will rise, but breaching the USD 80/barrel level was a key technical signal. We are also still waiting to see the full effect of the US sanctions against Iran, which take effect on 1 November. Iranian oil production has already dropped 450,000 barrels/day over the past few months, but it is estimated that it may fall by up to 1 million barrels/day when sanctions are fully implemented.
Overall, quite a bullish input from the oil market, and gas prices have risen sharply from the start of this week.
Bullish mood: The market focuses on factors that can make the price go up.
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