Continuation of the relatively the mild winter continues to keep a lid on curve prices
Despite the continued outage at the Norwegian Aasta Hansteen processing plant impacting on gas flows to the UK and Europe, prices continued their recent downward trend. The drop in supply from Norway was offset by strong LNG send-out and withdrawals from storage as the system easily coped with yesterday’s demand pushed marginally higher as a result of slightly cooler temperatures. Warming European temperatures over the coming days and the expected increase in wind generation both weighed on prompt gas prices. The continuation of the relatively the mild winter continues to keep a lid on curve prices as the less gas withdrawn from storage will keep the demand in summer lower and reduces the risk of supply issues next winter.
The weak gas market continuing to be the key driver for electricity prices
Despite strike action at French power plants baseload prices in the UK fell as France turned to Germany, Belgium, and Spain to replace its power gen shortage. The forecast of increased wind speeds and subsequent wind generation weighed on baseload prices. Lower NBP gas prices also influenced prices as generation costs should be lower due to the lower input fuel cost. On the curve the minor increase in UKA carbon markets were not enough to cause prices to climb with the weak gas market continuing to be the key driver for electricity prices for the rest of 2023 and out as far as 2025.
Following on from Monday’s gains the oil markets continued to gain value
Following on from Monday’s gains the oil markets continued to gain value. The price per barrel was pushed higher as a result of hopes an increase in Chinese demand as the economy continues to recover post-lockdown. Coupled with the improving economic data were supply issues at several locations. Following the earthquake in Turkey, Turkish exports via the Ceyhan pipeline are halted until further notice, while Iraq’s loading of oil cargos at Ceyhan were hampered by adverse weather preventing ships from berthing at the port. A minor outage at a North Sea oil rig also added to the supply woes. Phase 1 of the Johan Sverdup rig was offline due to a technical issue, impacting the production 0.535 million barrels per day of sour crude, a quality that has been limited due to the EU ban on Russian oil.
The bearish sentiment prevailed on gas markets
The bearish sentiment prevailed on gas markets this morning, with any contract that has traded trading below yesterday’s close. The system is marginally long as demand is stifled due to mild weather and increasing wind. Both March and April opened below yesterday’s close and have continued to lose value in early trading, shedding over 5.00p per therm each. Oil rose for a third straight day as concerns regarding US interest rates eased and an industry report pointed to a drop in US crude inventories. At the time of writing the Brent Crude front month traded at its high point of the morning at $84.80 per barrel.