UK gas contracts corrected significantly lower from market opening on Friday
UK gas contracts corrected significantly lower from market opening on Friday, releasing premium gained recently. The NBP prompt market collapsed, with the day ahead settling at 45.05p/therm, a price not seen since June 2021. Positive market fundamentals were the key drivers for spot prices, as weekend temperatures surpassed seasonal norms while ample supply left the system 4.7mcm oversupplied. Weakness in the prompt fed into the front month contact which lost 28.33p/therm, settling at 137.50p/therm. Friday’s downward momentum was not as much in the seasons, with the Winter 2022 down 8.61p and Summer 2023 down 2.24p at 242.51p/therm & 184.84p/therm, respectively.
Gas prompt weakness fed into the power prompt
GB baseload power was happy to follow the gas market lower on Friday as ample supplies of gas saw the UK NBP give up significant premium. Gas prompt weakness fed into the power prompt with both the weekend and day ahead contract falling. The day ahead power contract fell to £159.25/MWh, down by £7.75. The GB baseload futures also turned lower although an increase in the EUA carbon price offered a modicum of support the front month June baseload power contract settled at £160.50/MWh, down by £17.25.
The Brent crude market was volatile during Friday’s session
The Brent crude market was volatile during Friday’s session, hitting a high of $113.50 a barrel and a low of $110.20 before closing at $112.39, up $2.60 from the previous settlement. Strength in the market came from news that the US plans to refill its strategic oil reserves by 60 million barrels in the second half of 2023. This move will boost demand in the future at a time when prices for crude oil are anticipated to be lower than today’s market price. Geopolitical tension also supported the upward sentiment, as Hungary’s PM announced the country would need five years to wean off Russian oil. EU exemptions may be introduced to other landlocked countries such as Czech Republic and Slovakia who lack supply flexibility and rely solely on pipeline supply.
Prompt weakness remains a significant feature this morning
Prompt weakness remains a significant feature this morning with spot and day ahead prices being quoted at 55.00p to 60.00p. While this is higher than the close from last Friday the market is as weak as it has been since June of 2021. The weaker prompt continues to pressure near-term future contracts and both June and July are under considerable pressure. The front month June contract is down by 8.50p at 129.00p while July is changing hands at 162.10p, down by 13.60p from Friday’s close. The gas system is in balanced this morning with forecast demand of 219MCM being evenly matched by supplies. Crude oil markets are down by just over a dollar as Brent trades at $110.95.