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Natural gas prices predicted to stay competitive for the UK’s buyers over the next year and beyond

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Natural gas prices predicted to stay competitive for the UK’s buyers over the next year and beyond

Date
June 10, 2020
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The UK’s gas buyers could see the wholesale NBP price stay low well into 2021 due to a mild winter and the Covid-19 crisis, Hartree predicts based on data analysis of the energy market

In both Europe and Asia, the winter temperatures for 2019 – 2020 were mild, leaving excess gas in the global liquefied natural gas market (LNG). This LNG glut found its way into Europe, displacing European storage withdrawals and leaving end-of-winter European storage at an all-time high.

Chart showing EU Gas Storage rates in 2020
At the start of the Covid-19 pandemic, North-Western European stocks were twice as full relative to the five-year average

Unsurprisingly, Covid-19 took the natural gas market into unchartered territory, progressively destroying demand in countries in lockdown for at least two months driving prices to new lows.

Chart showing UK Gas price during 2020 and COVID-19
The UK Gas spot price hits single digits as demand fails to materialise.

Natural gas prices in Asia

China was first to falter, with demand falling almost 40% from 9.6 bcf/d in January pre- lockdown, to just over 5.9 bcf/d for nearly 8 weeks. This crushed the LNG price in Asia from $5.3/mmbtu in early January, to a low of $1.9 mid-April – additionally pressured by other Asian LNG buyers going through their own Covid-19 crisis.

Changes in European natural gas prices

Ultimately, much of the excess LNG was pushed to Europe, which is both a large demand centre and has large storage capacity. But even Europe has its storage limits and with high stocks coming out of winter, we expect European storage to hit full capacity in August.

LNG producers have responded with cuts in production from major suppliers, the USA, Russia and Norway. France has forecast much reduced nuclear production for the balance of the year, implying more gas-fired power will be needed to fill this gap, but even so, we forecast prices to remain under pressure and continued single-digit NBP prices in Q3.

With European storage expected to be full as we go into winter and producers likely to start producing just as soon as the market can pay their variable costs (thus putting a cap on any market rallies), we don’t predict the market cleaning up until well into next year, possibly the winter of 20/21.

In the end, of course, the world will find a demand for cheap natural gas. But for the next twelve months, at least, there should be a lot of competition for UK gas buyers.

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written by
Paul Garske

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Kansai Electric Power Group and Hartree Partners sign first term contract in Japan coupling LNG supply with carbon investments. 

Japan, 14th December 2023: Japanese power company, Kansai Electric Power Group (Kansai Group), has signed…

Japan, 14th December 2023: Japanese power company, Kansai Electric Power Group (Kansai Group), has signed a binding term agreement with Hartree Partners for the supply of LNG alongside investment in a nature-based carbon project in Australia, the first deal of its kind in Japan. The deal represents Kansai Group’s long-term commitments to decarbonisation and the provision of low-carbon energy for its customers. 

This LNG supply agreement enables KE Fuel Trading Singapore Pte. Ltd (KEFTS) to grow its LNG portfolio which will support Kansai Group’s LNG supply-demand situation and customers around the globe.  

Also, through its expertise in global carbon markets and its project portfolio in Australia, specifically focused on nature restoration, Vertree Partners, Hartree’s global carbon market arm, will support The Kansai Electric Power Co., Inc. (Kansai Electric) to access future supply of high-integrity carbon credits to support its Zero Carbon Vision.  

Both companies will explore potential opportunities to support Japan’s national net zero targets in areas such as LNG, renewable energy, environmental products and carbon capture and storage (CCS). 

Hartree Partners is a well-established global energy and commodities firm with decades of experience in the physical and financial energy and commodities market. Its wholly-owned subsidiary, Vertree Partners, is focused on decarbonisation and environmental markets.  

“Carbon credits have an important role to play in realising a zero-carbon society,” said Hideaki Ikai, Executive Officer, Operation and Trading Division in Kansai Electric. “Kansai, as a leading company of zero-carbon energy, is proactively studying ways to create a carbon neutral society, and I believe that this collaboration with Hartree Partners will accelerate our activities to achieve the goal of carbon net zero by 2050.” 

Shinichi Kudo, Chief Executive Officer, KEFTS, added “The combination of LNG and carbon credits will give us a promising option to attain our mission to provide our customers with stable energy supply and decarbonization solutions.” 

Ahmed S Al-Awa, Managing Director of Hartree Partners Singapore Pte. Limited and a Partner of Hartree Partners, said “this forward-looking move by Kansai Electric Power Group sends an important signal that carbon markets are likely to become a key component of the natural gas/LNG value chain as the sector moves to decarbonise.” 

Ariel Perez, Managing Partner of Vertree Partners added “We are committed to supporting Kansai Electric Power Group to make credible investment in the carbon market. The market is evolving rapidly, and companies may be increasingly exposed. Investments such as these support future preparedness whilst also directing finance to nature-based solutions, without which we face continued environmental degradation and eco-system loss and increase the risk of missing our global climate goals.” 

 

About The Kansai Electric Power Co., Inc. 

Kansai Electric Power Group, as a Japan’s leading electric power company, is aiming for carbon neutrality throughout the entirety of its business activities by 2050 to limit global warming, while increasing energy independence to secure energy supply for its customers, Kansai Group can be found at https://www.kepco.co.jp/english/ 

About KE Fuel Trading Singapore Pte. Ltd 

KEFTS, a 100% subsidiary of Kansai Electric, was established as an LNG trading arm of Kansai Group in April 2017. KEFTS has been supporting Kasai Electric’s LNG supply-demand balance and providing LNG portfolio for customers around the globe, and now enhances its activity to support Kansai Group’s carbon neutrality at its base in Singapore.

About Hartree Partners  

Hartree Partners, LP is a leading global energy and commodities firm with an international reputation for integrity developed over decades. Our expertise enables us to capitalise on the transition from fossil fuels to a low carbon economy. Hartree’s global breadth and reach provide a competitive presence in a comprehensive range of commodity markets, enriched by the firm’s employees who add deep insight, expertise and innovative thinking. More information concerning Hartree can be found at www.hartreepartners.com 

 

About Vertree Partners 

Vertree Partners enables leading companies and institutions to invest in both nature and innovative climate technologies to assist them in reaching their decarbonisation goals. Founded in 2020, Vertree is focused on driving positive environmental and social impact, and providing its customers access to existing and future supply of high-integrity environmental commodities. It does this through directly financing quality emissions reductions and removals projects; partnering with renowned project developers; investing in innovative organisations and technology-based solutions; and providing its expertise in voluntary and compliance markets, trading, market analytics and risk management. Vertree is wholly owned by Hartree Partners. 

www.vertree.earth 

 

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AGP Sustainable Real Assets and Hartree Partners Announce US Expansion of Global Solar Partnership

AGP Sustainable Real Assets Pte Ltd (AGP) and Hartree Partners, LP (Hartree) today announce the…

AGP Sustainable Real Assets Pte Ltd (AGP) and Hartree Partners, LP (Hartree) today announce the launch of AMPYR Energy USA, the second joint venture between the two organizations in just over a year.

AMPYR Energy USA will be headquartered in New York and is targeting to build a 5GW utility-scale solar PV platform across multiple US markets. With experienced renewables development professionals on the ground, the newly-created company will continue to leverage AGP’s experience in developing large-scale renewable power projects globally, and Hartree’s cutting-edge power trading analytics and zero-carbon solutions.

“With the Federal and State goals for accelerating the energy transition, the US will be one of the fastest growing solar markets in the world and a core strategic priority in realizing AMPYR’s ambition of becoming one of the largest independent renewables developer and operator globally,” said Saurabh Beniwal, Partner at AGP and Board Chair for AMPYR USA.

Since its inception in February 2021, Hartree and AGP’s European solar venture, AMPYR Solar Europe (ASE), is making swift progress towards its goal of rolling out 5GW of large-scale solar projects to establish itself as one of the largest utility scale solar platforms in Europe. ASE also recently closed a €400 million facility to support this plan.

Following in the footsteps of ASE, expectations are equally high for AMPYR USA.

“We are excited to take another step forward with AGP into the US market,” said Stephen Semlitz, Managing Director of Hartree. “This new venture allows us to further demonstrate our decades of experience in finding investment solutions, consulting, and generating sustainable and commercially viable strategies for energy renewal and regeneration.”

To learn more about the new US venture visit: www.ampyrenergyusa.com

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