Carbon markets have rebounded slightly this morning

15 March 2023

Gas Market

The weakening market fundamentals continued to influence prices on Tuesday. LNG deliveries are still arriving at ports across Europe, with deliveries in the UK in line with year ago levels while deliveries into Belgium are twice what they were this time last year. Storage sites across the EU are currently 56% full compared with 26% full in March 2022. As well as gas market fundamentals leading to a softer market, the recent fall on the EUA carbon markets is also having a positive effect on gas prices. Reflecting all of the above, gas prices tumbled lower on Tuesday. April, the front month lost 14.56p to close at 110.52p per therm, while losses across the curve saw the Winter-23 contract fall 13.68p, a fall of over 9% from Monday’s close, being assessed on Tuesday at 135.67p per therm.  

Power Market

Prices continued their price correction from last Friday. The initial shock of cracks in the some of the French nuclear fleet has dissipated, although the full extent is still not known. The fall on the NBP gas market has obviously helped temper the fears and helped prices fall back to levels close to where they were a week ago. Winter-25 was impacted the most, closing at £150.50 per MWh, a loss of £12.50. EUA carbon market continued to fall for a second consecutive day. Prices fell through technical support levels as demand on the daily auction was at its lowest levels seen in six months with traders commenting on the fact speculators seemed to have exited the market.

Oil Market

For the first time in five weeks on Tuesday, Brent crude traded below $80 per barrel, closing at $77.45, the lowest rate since December 9th. Both the international benchmark and the U.S. benchmark, WTI, had dropped more than $5 since Friday. The drop in prices is primarily attributed to the Silicon Valley Bank crash, and analysts also pointed out the Federal Reserve’s aggressive rate hikes over the past year. The Fed’s efforts to curb high inflation rates through a series of rate increases that could potentially slow down the US economy are being closely monitored. However, there is hope that the next rate increase will be less severe, with a projected increase of 25 basis points compared to the previously anticipated 50 basis points.

Markets this morning

Gas markets opened higher this morning before the losses continued. The front month contract is down by almost 2.00p per therm, with May and June following suit. On the curve trading has been muted with early morning trades the only recorded trades at present. Despite last trades being up, the current bids and offers indicate the next trade will see prices fall below yesterday’s close. Oil has made moderate gains this morning on the back of positive soundings from OPEC late yesterday evening. Carbon markets have rebounded slightly this morning with the Dec-23 contract up by almost €1.00 per tonne in early trading compared to yesterday’s closing.
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