Gas market – Minor changes last week. Oil price rising from the start of this week
A rise in the coal price was the most significant input to the gas market last week, which ended up slightly for the year contracts. The weather was virtually unchanged, and the front contracts ended slightly down.
The rebound in coal appears to primarily be a reaction to the recent strong decline. Coal has also dropped back about USD 1/tonne from the start of this week, despite oil rising over USD 3/barrel.
Oil prices rose following the weekend’s positive signals from the G20 summit, where Trump and Xi agreed on a ‘ceasefire’ in the current trade war between China and USA. This was generally interpreted positively for the global market and hence also for the oil market. There will also be an OPEC meeting on Friday. It’s expected that agreement may be reached here on production limits, which will further strengthen oil. Oil rose about USD 3/barrel on Monday, and is up a further USD 1.50/barrel at the time of writing.
There’s an elevated risk of a cold second half to the European winter. This will affect gas if it eventuates, with gas consumption increasing. If you’ve not hedged your gas exposure for the rest of the winter, you should definitely consider doing so, especially given that prices have dropped significantly from the levels seen a few months ago.
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