Gas prices for next week made some gains in Thursday’s session due to a revised forecast of colder temperatures. Average temperatures in the UK are expected to drop by 1.5 degrees boosting gas demand for heating, pushing prices for next week up by 1.10p per therm. Gas due for delivery today and this weekend all made losses due to a healthy supply picture and a drop in demand in continental Europe. UK exports on the Interconnector are expected to drop by 39% day on day. Movement on the near curve could be described a benign with prices falling by less than half a percent. Further long the curve gas pries made larger losses, with average prices for seasonal contracts in 2024 and 2025 falling by 1.59p per therm on average. The fall is likely being driven by a weakening carbon market that fell again by almost 4% over the course of yesterday’s trading.
A drop in expected wind generation increased the day ahead baseload contract session on session. The contract gained £2.5/MWh, closing at £139.5/MWh. Having hit record highs, the carbon price has abated somewhat, and the fall there has impacted on the UK power market. Longer dated contracts were pulled lower due to the carbon market, while losses on the NBP gas market impacted the near curve power prices. On the seasonal contracts for 2024 and 2025 an average of £1.66/MWh was wiped off the contracts Over the last 5 days far dated curves have lost 3.6% in value, or a drop of almost £5.00/MWh.
Thursday saw volatile oil prices as the anticipated demand recovery in China clashed with discouraging inflation data in Europe. Statistics emanating from the EU estimated the Eurozone’s inflation rate had risen to an annual rate of 8.5%, with energy continuing to be a major driver of inflation. The European Central Bank has also hinted at higher interest rates for a longer period, adding to recession worries for the region. Adding to the bearish sentiment is the current strength of the dollar and for the tenth consecutive week an increase in US crude stocks. According to data from the Purchasing Managers’ Index, Chinese manufacturing activity grew at its fastest pace in over a decade last month, indicating a surge in demand for oil. In the near-term China is on track to import a record volume of Russian Oil which is currently priced at a discount to Brent Crude.
Markets this morning
On the first Friday of March, UK gas prices have opened in negative territory. The front month contract has taken the brunt of the downward sentiment, shedding 3.97p to last trade at 114.13 pence per therm while the bellwether contract Summer 23 has extended yesterday’s loses and last traded at 117.70pence. There is limited trading activity on the NBP prompt market on the back of the UK gas system is balanced this morning. Gas demand is forecast at 297MCM with Norwegian gas imports meeting 60 percent of this demand. EUA carbon contracts have picked up where they left off, with the Dec 23 contract creeping marginally lower to last trade at €93.22 a tonne.