NBP: – 8% in early April compared to the March average
The winter season for the gas industry (October 2015 to March 2016) closed with the NBP price very low at €15.4 /MWh ($4.9/MBtu), which is 30 to 46% lower than for the three previous winters. The downtrend that started in early 2015 resulted from a relatively abundant supply and a decline in the prices of contracts 100% indexed on oil. In fact, these prices defined the NBP trend. The decline continued in the first April quotations (-8% compared to March) as the NBP dropped below the €12/MWh ($4/MBtu) mark. The markets are expecting a minimum price of €11/MWh ($3.7/MBtu) during the summer. The fact that the volumes stored in Europe are relatively large partly explains the absence of price pressure.
In the first few days of March, the NBP was quoting at about €13/MWh ($4.2/MBtu), close to the previous month’s average. These levels are extremely low. Not since April 2010 (euro prices) and October 2009 (dollar prices) have such low numbers been recorded. The monthly average hit rock bottom at €7.6/MWh ($3.3/MBtu) in September 2009. The markets are not anticipating prices to drop that much next summer, but a series of decreases from the current levels to the vicinity of €11.8/MWh ($3.9/MBtu). For next winter, the NBP is expected to reach $14-15/MWh ($4.6-5.0/MBtu), in line with contracts 100% indexed to oil. This convergence indicates that the market deems $4.6-5/MBtu to be the lowest equilibrium threshold tenable in an average winter.
The NBP fell from €22/MWh ($7/MBtu) in March 2015 to €14.5/MWh ($4.6/MBtu) in January 2016, which represents a decline of 35%. This decrease is consistent with the general trend in energy prices over the same period: coal was down by 25%, oil by 45% and the average price of Japanese LNG by 35%.
The NBP stood at about €13.2/MWh ($4.2/MBtu) at the beginning of February and is expected to keep sliding. The futures markets anticipate a price of €12.2-12.4/MWh ($4.0-4.1/MBtu) for next summer. These forecasts are in line not only with the decrease in the average six-month oil price, which will also hit bottom next summer, but also with expected coal price trends. The average NBP for 2016 is now pegged at €13.2/MWh ($4.3/MBtu), i.e. 34% lower than in 2015.