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Bearish Drivers

· Storages refilling on track to be full ahead of the start of heating season.
· Continued weak power sector demand, exacerbated by forward curve above the minimum CSP.
· Further weakness in the Eurozone manufacturing sector suggesting slower industrial recovery.

Bullish Drivers

· Stronger residential demand and possibility of even colder below normal weather to lift demand even higher.
· Despite both sides seeming intent on keeping the gas flowing, damaged infrastructure at Sudzha remains an elevated risk.
· Middle East geopolitical uncertainty.

Throughout October, prices on spot and near-curve contracts have remained mostly rangebound, with periods of heightened volatility driven primarily by geopolitical events. On October 4th, Day-Ahead (DA) and Front-Month (FM) prices reached yearly highs but have eased slightly since, as Middle East tensions moderated following reports that Israel will avoid targeting Iranian oil facilities. However, Israel’s planned retaliation for last month’s missile attacks from Iran keeps market participants on edge.

The UK gas market is expected to tighten in November, with the NBP contract currently trading at a 2p/th premium over its TTF counterpart. This suggests that the UK may start importing gas through the Interconnector (IUK) pipeline, marking the first net import since March. LNG sendout remains subdued compared to last year, though it’s higher on a month-to-month basis.

Norwegian production is projected to remain steady at 329 million cubic meters per day (mcm/d) in November, which aligns with last year’s output and reflects a 17 mcm/d increase from October as maintenance activities ease. The UK’s gas balance outlook suggests a tighter supply environment compared to November last year, with imports from the Continent likely necessary to meet demand, especially through the IUK.

While Local Distribution Zone (LDZ) demand is expected to rise across both the UK and Northwest Europe (NWE), the UK shows a more significant year-on-year increase of 18 mcm/d versus NWE’s 3 mcm/d. Industrial gas demand remains weak, with no improvement in economic indicators, while power demand for gas is low due to robust renewable and nuclear generation. Although gas-for-power demand will likely see a month-on-month uptick, it remains below last year’s levels.

The EU’s 90% storage target by November 1 will be met easily, with Northwest Europe storages expected to draw down by 55 TWh in November, ending the month at around 85% full—11 percentage points below last year’s levels but still at a healthy capacity. However, risks to this outlook include potential European gas infrastructure outages, global LNG supply disruptions, and volatile geopolitical developments in the Middle East, which could spur short-term market fluctuations. Weather revisions may also add uncertainty in the coming weeks.

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