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Bearish Drivers

• The updated balance for May indicates storage will end at around 381TWh (68% fullness). This is higher than previous expectation with a warmer than average start to April resulting in a ramp-up in injections.
• Demand destruction across UK domestic and Industrial sectors continues.
• Softer demand from the power sector.

Bullish Drivers

• Geopolitical concerns are elevated. Further escalations in the middle east remain a strong possibility as do any additional attacks on Ukrainian gas storage infrastructure.
• Risk of unplanned outages on Norwegian and UK continental shelf, stronger risk around Norwegian outages due to several large, planned maintenances next month.
• LNG send is out lower year on year, some risk around US exports based on recent feed gas issues.

April has been a highly volatile month for gas markets due to heightened geopolitical tensions. The month began with bearish trends due to high storage inventories and mild weather conditions. However, prices surged on April 11th following Naftogaz’s announcement of Russian attacks on gas storage facilities, the EU parliament’s decision to potentially ban Russian/Belarusian gas imports, rising Iran-Israel tensions, and operational issues at Freeport Train 3. Additional support came from lower temperature forecasts and increased gas demand for power. As a result, prices increased by over 12% on gas front month, 11% on TTF, and 9% on JKM by mid-April. Although prices slightly retraced after maintenance issues were resolved, they remain elevated with a 15% overall increase across the benchmarks, and further spikes are possible due to ongoing geopolitical uncertainties.

Looking ahead to the remainder of May, the updated balance shows storage levels at around 381 TWh (68% fullness), slightly below the 390 TWh (69%) at the end of May 2023. This is higher than expected due to a warmer start to April, which led to increased injections amidst weak demand, indicating a bearish outlook. The medium-term outlook remains unchanged since March, predicting 97% storage by the end of summer 2024 and 96-98% by October 1st. The summer outlook remains bearish, with ongoing risks for winter 2024. In April, gas day ahead traded at a discount to TTF day ahead, and the UK’s comfortable balance in May could widen this spread. Exports from the UK to the continent are already booked at 50 mcm/d.

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