By Paul Gleaves, Head of Risk and Trading
This week saw Apr ‘20 gas contracts close on 28.35 p/Th, the lowest price for any gas annual since Apr ’08 (annualised futures hit 30.88 p/Th on 20th February 2007). Gas prices have been on a prolonged slump as high global Liquified Natural Gas (LNG) supply, a comparatively mild winter and record high gas storage levels have pressured prices lower.
Market falls had consolidated over the past couple of weeks as colder weather increased gas heating demand, whilst a number of LNG vessels have been left stranded outside Milford Haven, unable to dock due to the stormy weather. This supply tightness had led some traders to cut their short positions and take profits after a period of sustained falls. A trader is ‘short’ in the market if they are betting on future market falls.
However, growing concerns about the coronavirus has seen bearish sentiment return to global markets over the past week as traders reload their short positions. Supply fundamentals in gas markets remain bearish; however with Sum-20 gas futures now trading close to the marginal supply price of American LNG, traders will be twitchy about where the floor to prices actually lies. Any supply disruptions or bullish news to markets will likely drive heavy buying interest owing to the proximity to delivery.