Despite the looming cold weather prompt contracts all fell on Monday as the Interconnector between the UK and Belgium unexpectedly went offline. The UK typically export gas to Europe and the equipment failure is reducing total demand and causing prices to fall. Prices on the near curve also fell influenced by the expected increase in temperatures next week and an increase in wind generated power reducing the demand for gas. The picture further along the curve remains the same with LNG cargos and plentiful levels of gas storage across Europe contributing to the continued falling prices.
Baseload power contracts continued their downward trajectory through Monday’s session. Weakening gas NBP prices were feeding through to baseload curve with Summer-23 and Winter-23 down £4.75/MWh and £5.75/MWh respectively. Despite a minor upturn in EUA carbon prices, the UK carbon market made some minor losses that also fed through to baseload curve contracts. A lack of wind has helped to support prices on the prompt market but the expected increase in wind generation next week coupled with a return to full capacity of the Hartlepool nuclear reactor 2 later this week is influencing near curve prices lower with April last assessed at £115.25/MWh.
In early trading the price of oil decreased initially following China’s announcement of a lower-than-anticipated target for economic growth this year of approximately 5%. This forecast, which was disclosed on Sunday, was below last year’s objective of a 5.5% growth rate for GDP. According to policy sources last week, the target for 2023 could have been set as high as 6%. In 2022, GDP increased by a mere 3%, and Chinese authorities have yet to signal any significant stimulus to charge the economic recovery this year. U.S. Federal Reserve Chair Jerome Powell is expected to be asked about the need for greater interest rate increases in the world’s largest oil-consuming nation during his testimony to Congress this week which may eventually lead to a fall in oil demand. However, in late trading it was construed as an uncertainty for US monetary policy weakening the dollar which helped strengthen the price to close in positive territory at $86.18 a barrel.
Markets this morning
The UK gas market appears to be taking stock of the large scale sell off yesterday, with prices essentially flat day on day at present. April and May are up by an average of 0.18p per therm, with Summer-23 and Winter-23 opening lower again this morning at 107.50p and 130.50p respectively. The expected return of the Interconnector tomorrow has helped to strengthen day ahead gas while within day is lower still due to the lack of exports to Europe. The Brent crude front month contract is also essentially flat at $86.25 a barrel as the market awaits the Federal Reserve’s direction on monetary policy. Having stopped the rot yesterday, the Dec-23 carbon contract is up almost 2% in strong trading this morning.