Significant risk premiums collapse in near curve contracts
UK gas futures continued to sink during yesterday’s session, as significant risk premiums collapse in near curve contracts. November the front month contract settled at 297.49p, its lowest level since June 17th
, to add further context the November contract peaked at 788.03p per therm on August 26th
, highlighting the level of volatility in the current gas market. A sizeable premium also fell out of the 2023 calendar year contract, which ended the day at 407.06p per therm, down 47.72 pence. European gas markets have been quick to shrug off the recent sabotage of Nord Steam pipelines and with the majority of Norwegian maintenance works now behind, the UK supply outlook for near term is in a comfortable position compared to recent months. UK prompt contacts also softened yesterday.
An overall bearish sentiment filters through contracts across the curve
GB baseload prices continued to decline for the third consecutive session yesterday, as an overall bearish sentiment filters through contracts across the curve. November the front month contract displayed the most predominate losses, down 11% day on day to settle at £520.00/MWh. Summer-23 settled at £309.50/MWh, its lowest level since early August. A weakening in prompt gas prices helped Baseload for the day ahead to move £21.82/MWh lower on the day, settling at £167.89/MWh. Robust wind output of 12.9GW also supported the downtick in the day ahead contract.
Brent crude prices made modest gain’s during Monday’s session
Brent crude prices made modest gain’s during Monday’s session, as the market once again took direction from the oil cartel OPEC+. The group will discuss cutting their production output by 1 million barrels a day at their meeting on Wednesday. This would be the most significant curtailment since 2020, when the group reduced output by a record 10 million barrels a day as global demand crashed due to the pandemic. Nevertheless, demand for oil across the global remains uncertain as recession fears contend with economies. Brent crude front month gained $3.72 on the day to settle at $88.86 a barrel.
NBP gas contracts have picked up where they left off yesterday
NBP gas contracts have picked up where they left off yesterday, with November the front month contract currently trading down 8.49p at 289.00 pence per therm, while the front seasonal contracts are yet to trade. The spot contract is also yet to trade, however the day ahead contract is trading at 140.00p, down 8.05 pence. The UK gas system is relatively balanced with demand at 239MCM, robust supplies of 173MCM from Norway and LNG sent out meeting the remaining volume of demand. Brent crude prices are also on the same trajectory as yesterday’s session, with the front month contract currently trading at $89.52 a barrel, an increase of 66 cents from yesterday.