Ample gas supply is preventing a weather based bullish run

06 March 2023

Gas Market

UK gas prices continued their downward trend on Friday, with contracts across the curve settling lower for the second consecutive session. Despite the forecast of cold weather, it seemed to have no impact on the gas market as near term fundamentals remain strong. The front season, Summer 23 settled at 115.28p, a price that has not been seen since February 15th of last year when there was an abundance of Russian gas flowing into Europe.  Price in the NBP prompt market also drifted lower, as ample storage levels are preventing a weather based bullish run from filtering in the market. The Within day and Day ahead contracts settled at 122.05p and 118.75p respectively on Friday.

 Power Market

Modest premium fell out of the GB baseload power market on Friday, tracking downwards movements in both UK gas and carbon markets. The front month contract April 23 edged £4.25/MWh lower to settle at £121.25/MWh while the Summer 23 contract closed at £124.75/MWh a price not seen since late February of last year. The collapse in spark spread premiums have supported the downward sentiment, with triple digit prices a distant memory. Baseload for day ahead delivery ended the week at £131.77/MWh down £8.78/MWh on the day.

 Oil Market

Global oil markets experienced a volatile session on Friday, as prices dip in the afternoon before rebounding to extend four consecutive days of growth. The sudden drop in prices was prompted by rumors’ that the United Arab Emirates (UAE) is internally debating leaving the oil cartel OPEC+. If the UAE were to depart from the group, it would have the freedom to increase its oil production and flood the market. The dovish sentiment flipped into a bull run when news that China may set a 6 percent economic growth target for 2023. Brent crude front month contract settled at $85.83 a barrel, up $1.08 on the day.

 Markets this morning

UK gas prices has continued to fall this morning, with the front month last trading at 108.07p, down 5.11p from Friday. Summer 23 is following a similar trajectory, down 4.83p at 110.45 pence per therm, a price range not seen since before the Russian invasion of Ukraine. Although the UK system has opened marginally undersupplied with demand forecast at 301MCM, this has failed to influence the prompt market, which has also opened soft. The Within day and Day ahead contract are in sync this morning, both last trading at 115.00 pence per therm. Prices in the EUA carbon market have gained momentum this morning, with the Dec 23 contract last trading at €94.33 a tonne.  
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