Weakness in the prompt supports losses along the near curve
UK gas future contracts continued to ease on Thursday, as the recent bearish sentiment in the prompt market holds firm. The front month contract peaked at 276.00p before falling back to settle at 266.39p per therm, down 45.03 pence per therm over the last five days of trading. NBP seasonal contracts also fell fractionally, with Summer 23 ending the session at 280.00p down 1.01 pence per therm. A weaker prompt market continues to encourage risk premium to fall out of near delivery contracts, as demand remains below seasonal norm while near term supply is robust. The NBP day ahead contract has traded at an average of 96.76p per therm in November while it ended yesterday’s session at 94.08 pence per therm.
GB baseload contracts shed value
GB baseload near curve contracts declined for the fourth consecutive session on Thursday. January 23 contract took the biggest hit, scaling back £30.75/MWh to settle at £492.50/MWh while Q1 23 lost £16.50/MWh to settle at £414.00/MWh. Risk premium continues to fall out of the market from the front of the curve, taking direction from healthy near-term fundamentals. Baseload for the day ahead settled £11.89/MWh lower at £88.27/MWh. The recent weakness in the prompt market is being factored into the near curve, as it outturns lower than the futures market.
Crude Oil markets take direction from US inflation rates
Brent crude pushed higher during yesterday’s session, shrugging off losses in the open hours of trading. Lower than expected US inflation rates supported the upward sentiment, with October inflation hitting 7.7% compared to 8.2% in September. The news rippled into the currency market with the US dollar taking a step back and in turn boosting oil prices which have an inverse correlation to the US dollar. Brent crude front month settled at $93.67 a barrel up $1.02 on the day. The WTI equivalent contract settled at $84.67, a discount of $12.00 a barrel against Brent crude. However, oil markets continue to grapple with supply and demand fundamentals, as a global economic slowdown can hinder demand.
Clear downward sentiment in the UK gas market this morning
UK gas future contracts have opened with a clear downward sentiment this morning. December the front month opened at 251.00p and is currently trading at 248.05p per therm, down 18.34p. Q1 23 is also showing signs of pressure, last traded at 295.74p a discount of 18.03p from yesterday’s settlement. The UK system has opened marginally oversupplied this morning, with an uptick of 15MCM in LNG send out compared to the previous session. Oil prices are showing significant gains this morning, with a weaker US dollar supporting the market. Brent crude front month is currently up $2.68 at $96.35 a barrel.
11 November 2022
