Monday saw prices along the NBP curve revert to bearish fundamentals after the market was spooked into heavy buying activity on Friday. Contracts across the curve lost value yesterday but fell shy of reverse all the risk premium built into contracts from Friday’s rally. April, the front month contract was hardest hit, shedding 8.48p to settle at 125.08p while the bellwether contract Summer 23 closed 8.07p lower at 127.49 pence per therm. During the opening hours of trading, it was unclear which direction the market would go, but prices were pushed down by heavy selling activity as closing time neared. While yesterday’s downward sentiment was welcomed, the recent rally has highlighted Europe’s vulnerability and serves as a reminder that volatility can return to the energy markets unannounced.
Price in the GB baseload market corrected to some extent yesterday, following on from Friday’s overreaction. Losses in the NBP gas market coupled with a falling carbon prices pushed GB baseload power contracts lower across the curve. The front month contract April took the brunt of the downward pressure, settling at £129.10/MWh, down £9.25/MWh but traded at a premium to the main European markets. EUA carbon market slumped yesterday, with the Dec 23 contract shedding €4.66 to settle at €95.51 a tonne. The bearish momentum was due to the risk aversion triggered by the rescue plan for Silicon Valley Bank. Baseload power for day ahead settled at £111.59/MWh.
Prices in the global oil markets took a step downwards on Monday, as the collapse of Silicon Valley Bank spurred fears of a financial crisis. Friday’s collapse was the second largest bank failure in the US, and was directly impacted by aggressive interest rate hikes, the question now is are any other banks vulnerably exposed to rising interest rates. The Brent crude front month fell below $80 a barrel for the first time since early January to trade at $78.34 but eventually crawled back the losses and settled at $80.77 a barrel down $2.01 on the day. The West Texas Intermediate equivalent settled at $73.98, its lowest level since December. China’s weaker than expected economic data added further pressure to the oil market. With February’s inflation rate at just 1%, it’s clear that the world’s second-largest economy is in a state of deflation.
Markets this morning.
The UK gas market has resumed its downward movement this morning, with risk premium continuing to erode. April, the front month contract last traded at 118.31p, down 6.77 pence per therm. Despite the UK gas system opening 13MCM undersupplied prices in the prompt market have also opened lower, with the Day ahead contract last trading at 120.50 pence per therm. The wider energy complex has is also on a downward trend this morning, with the Brent crude front month last trading at $79.29 a barrel, down 1.48 from yesterday’s close while EUA Dec contract has extended its losses to last trade at €96.04 a tonne.