Brexit vote triggers uncertain outlook for European gas markets


European natural gas markets are set for a week of uncertainty as traders process the impact of the UK’s decision to leave the European Union.

On top of that, the Dutch government has proposed cutting the production cap for the country’s largest gas field, creating something of a perfect storm for European gas market participants to deal with.

The UK public voted to leave the EU on Thursday, marking the beginning of the end to the 43 year relationship. The news sent the British gas contract for next-day delivery and next-month delivery higher by about 1p/th, while prices in mainland Europe gas markets moved in the opposite direction.

British NBP gains came as sterling slumped to a 31-year low against the dollar and was more than 6% down on the euro. This has provided euro-backed traders with an incentive to buy sterling-denominated contracts, which helped to bolster NBP products. The vote, which came as a surprise to many participants, kicks off a period of uncertainty for the British energy market and economy as a whole.

In the short term, the result will likely be bullish for the British gas market due to the depreciation in the pound.

Another impact of the vote has been a weakening of the oil benchmark, Brent crude, which fell by over $2.00/bbl on Friday morning. Bearish oil can drag down British NBP gas contracts due to the prevalence of oil-indexation in some long-term supply deals in mainland Europe.

Adding further uncertainty to the already volatile markets, traders found out on Friday afternoon that the Dutch government has proposed to reduce the cap for Groningen gas production by 11%, but with a provision to increase the cap in emergencies. Another fundamental factor that has impacted supply and demand in the British gas market has been an unexpected announcement that the Rough storage site will come offline for 42 days.

The announcement, which was made late Wednesday afternoon, has provided extra pressure on NBP prompt prices. This has been because shippers usually inject gas into storage during the warmer summer months. The reduced demand to fill the site could create a supply glut throughout July.

ICIS has followed the lead up to the referendum and is now providing up-to-date coverage of the developing situation in the aftermath of the decision.

ICIS graphics and news output help readers assess the situation as it develops across multiple products.

The latest Energy News on Brexit

Europe chem buyers more confident despite Brexit concerns – October CMCI

...Europe chem buyers more confident despite Brexit concerns – October CMCI. Niall Swan. LONDON (ICIS)--European chemical buyers’ confidence in the market... Thu, 27 Oct 2016

Norway’s Statoil holds off on Q3 gas sales

...produced a high amount of flex gas volumes while we did the opposite this year,” he said. Statoil’s flexible gas volumes largely originate from the... Thu, 27 Oct 2016

Ghana domestic gas production casts more doubt on FSRU

...Ghana domestic gas production casts more doubt on FSRU. Josie Shillito. Progress on developing Ghana’s Sankofa gas field is putting more pressure on planned... Thu, 27 Oct 2016

MEGlobal on track to start up US plant in mid-2019 - CEO

...MEGlobal on track to start up US plant in mid-2019 - CEO. Nurluqman Suratman. SINGAPORE (ICIS)--MEGlobal is on track to start up its shale gas-based 750,... Thu, 27 Oct 2016

SPIMEX delays Russian gas index launch to 2017

...The majority of those deals are those done by Russia’s independent producers, such as Novatek and Rosneft, as gas major Gazprom has to sell gas out of... Thu, 27 Oct 2016

Podcast: ICIS discusses the week's energy news highlights

Energy markets have been volatile this week because of the UK’s EU referendum as well as fundamental supply factors at the Rough natural gas storage site and Groningen production field. ICIS experts Ben Lee and Thomas Rodgers discuss the implications of the Brexit vote and what price drivers we can expect in the near term.

Click here to listen

European Spot Gas Markets

The ICIS European Spot Gas Markets report provides you with the latest prices, news and expert analysis on the current day's trading.

We publish independent price assessments and Heren indices for the British NBP, Dutch TTF, German NCG and GASPOOL, Belgian Zeebrugge and ZTP, French PEG Nord and TRS, Italian PSV, Austrian VTP, Czech VTP, Spanish AOC, Slovak VTP and Turkey.

European Gas Markets Report

The fortnightly European Gas Markets report provides you with a round-up of all the key developments, prices and industry news in the European natural gas market. It is a must-read for anyone looking for a comprehensive insight into the most relevant gas market news with a strong focus on supplier countries and routes.

European Gas Hub Report

The ICIS European Gas Hub Report provides readers with a comprehensive, quarterly analysis of liquidity and market developments, as well as an outlook for all liquid and developing trading hubs in Europe. The detailed report now includes not only the major hubs of northwest Europe, but even more markets that are growing and becoming more liquid across Central Europe and the Mediterranean.