Brent crude has opened lower this morning

04 January 2023

Fundamentals driving prices lower last week continued

As NBP gas markets opened for the first trading session of the new year, the fundamentals driving prices lower last week continued. The exceptionally high level of LNG being delivered to the UK and Europe continues to provide downward pressure on near-curve contracts. Data for December shows that the UK and Europe imported 11.95 million tonnes of LNG during the month, the highest amount so far recorded. The front month of February slipped a further 14.87p to close on Tuesday at 171.18p per them. Further out the decline in the summer 2023 contract was more modest at 11.41p, to give a settled price of 189.71p per therm. With wind generation and temperatures expected to exceed seasonal normal levels for the remainder of this week, demand for gas for heating should remain limited.  

 Declines in the GB baseload power futures

Declines in the GB baseload power futures prices continued on Tuesday reflecting further declines in the NBP gas futures prices. Contracts for the front month of February shed £19.50/MWh to settle at £184.50/MWh, however the largest fall was observed on the day ahead contract which retreated £51.87/MWh to end the session at £108.88/MWh. With higher than average wind generation and temperatures well in excess of seasonal averages for the remainder of the week, pressure on the spot and day ahead baseload contracts remains. Carbon EUAs for December 2023 slipped by another €2.35 to close at €82.94 a tonne.  

Crude oil markets reversed direction again

The first trading session for the new year saw crude oil markets reverse direction again, giving up the gains made on Friday. Mounting concern surrounding Chinese demand and the global economic outlook coincided with a strengthening U.S. dollar to pressure oil prices lower. The U.S. Federal Reserve are due to meet again on Wednesday and another interest rate increase is widely expected to curb inflation. Contracts for a March delivery shed $2.98 to settle at $882.93 a barrel. West Texas Intermediate similarly released premium with the front month of February falling $3.31 to finish the session at $76.93 a barrel.  

UK gas market has opened lower this morning

The UK gas market has opened lower this morning with contracts which have traded down on the closing prices from yesterday. Contracts for February, the front month has traded down 7.18p at 164.00p per therm and the summer 2023 contract has similarly traded down 8.71p at 181.00p per therm. Brent crude has also opened lower this morning with the front month of March down $1.86 to $80.24 a barrel. The system has opened with a moderate oversupply of 6.10 MCM against a demand of 356.6 MCM. On the spot, the within day has traded at 142.00p and the day ahead has traded at 144.00p a therm.  
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