Recession worries were once again to the fore as Brent fell

GB gas markets ended the week lower

The GB gas markets ended the week lower with the prompt responding to forecasts for higher temperatures and increased wind generation which should curb gas demand for the next week or so.  The day ahead product settled below the 100.00p per therm mark for the second time this month while near curve contracts shed an average of 22.40p on the day.  The November contract shed 20.02p to close at 261.35p, the lowest settlement for the product since early June. Over the week the front month was 23.69p down while the summer contract shed 16.81p. The GB gas system retained a healthy surplus on Friday with demand steady at 260MCM.  

  Baseload futures settled mixed on Friday

Baseload futures settled mixed on Friday, but the front months settled lower on forecasts for higher-than-normal temperatures into November.  The front month shed £38.75/MWh to close at £371.50/MWh, while December settled at £545.25, down £52.05/MWh.  Contracts from quarter 1 out settled within £10.25/MWh of the previous close. Improved wind generation coupled with higher temperatures weighed on the day ahead product on Friday. The contract settled at £130.00/MWh, was down 27.5% or £49.19/MWh.  EDF announced that 4.5GW of nuclear capacity will be offline for the next two weeks so exports to France may increase.  

The late rally in crude oil prices on Thursday afternoon was reversed on Friday

The late rally in crude oil prices on Thursday afternoon was reversed on Friday as prices tumbled by around $3.00 a barrel.  Recession worries were once again to the fore as Brent fell to $91.63 a barrel.  The EIA and OPEC have revised growth levels for quarter 4 lower while it is feared China’s zero Covid policy is weighing heavily on economic activity and denting crude oil demand for the world’s largest crude oil importer.  The U.S. inflation rate was down slightly for September at 8.2% but it is unlikely to deter the U.S. Fed from the aggressive policy on interest rates at their next meeting in two weeks’ time.  

Near futures have opened lower this morning

Near futures have opened lower this morning and the latest trade for the front month on the NBP curve is 19.35p down at 242.00p.  The December contract is down by a similar amount at 285.00p.  Contracts further out have yet to trade but are expected to open lower.  The same can be said about the prompt market which is still to open. The GB gas system is long by 12MCM this morning, buoyed by almost 85MCM of imports from Norway and a similar forecast for LNG send out today.  Brent for December delivery is flat to Friday’s close and crude oil prices have retreated off their earlier highs.

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