Gas contracts opened higher for the second consecutive session

08 March 2023

Gas Market

UK gas prices rebounded into positive territory during Tuesday’s session, however gains were capped at 3.00p on average.  This small increase is not a cause for concern when compared to the high levels of volatility that the market has experienced in recent times. The front month contract April displayed the largest increase, gaining 3.09p to settle at 108.75p per therm a fraction of its peak price of 759.15p. Further out, seasonal contract for 2025 remain less effected by the supply concerns, as the contracts are priced based on a better fundamental picture, which highlights a greater confidence in the supply and demand dynamics.  Price in the NBP prompt market also pushed higher yesterday, as the gas system remained tight. The Within day and Day ahead contract gained 5.00p and 4.28p per therm respectively.

Power Market

GB baseload prices pushed higher on Tuesday, tracking gains at the NBP and carbon market. The bellwether contract Winter 23 took the brunt of the upward momentum, gaining £3.50/MWh to settle at 146.75/MWh while trading at an average of 149.59/MWh this month. A similar pattern was evident in the EUA Dec 23 contract which gained €3.30 to settle at €96.07 a tonne. Baseload for day ahead delivery remained relatively flat yesterday settling at £131.32/MWh. The contract has traded at £134.3/MWh on average in March.

Oil Market

On Tuesday, global oil markets experienced a setback, moving down $1.02 on average over the last five days of trading. The decline in the commodity market was attributed to the US Federal Reserve Chair, Jerome Powell’s negative outlook and indications that central banks may raise interest rates at a faster pace than initially anticipated if the US economy continues to grow too quickly. Raising interest rates is one of the tools that central banks use to help maintain price stability in the economy, especially in times of rapid economic growth. The front-month Brent crude oil contract lost $1.10 and settled at $83.29 a barrel. The decline in oil prices was further exacerbated by a strong US dollar, as it can reduce the purchasing power of buyers using other currencies.

Markets this morning

Movement in the NBP gas market has picked up where it left off, as contacts opened higher for the second consecutive session . The front month contract April, last traded at 113.25p up 4.50 pence from yesterday. Summer 23, the front seasonal contract are followed a similar path, up 3.10p and last trading at 113.90 pence per therm. The UK system has opened 18MCM undersupplied this morning as demand is forecast at 346MCM. A drop in wind generation coupled with an outage on the BBL interconnector has led to storage withdrawals, which currently stand at 82MCM. Brent crude prices are relatively flat this morning, last trading at $83.38 a barrel.
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