Oil prices plunge to 15 month low amid recession fears

16 March 2023

Gas Market

On Wednesday, the momentum in the UK gas market remained weak, with prices correlating with the fundamental picture. The front month contract for April settled at 106.30p, which is the lowest price observed since December 2021. Additionally, the bellwether contract, Summer 23, closed at 109.44 pence per therm, releasing all of last Friday’s premium and a little more. It was a memorable session for the Summer 25 contract, as it was the first session since the Russian invasion of Ukraine where an NBP curve contract traded below the 100p level, as it ended the day at 98.52 pence per therm. Mild weather conditions an ample supply supported the prompt market once again, with the Day ahead contract closing at 103.05p, its lowest level of the year.

 Power Market

GB baseload power futures trade lower for the third consecutive session on Wednesday, as bearish sentiment hits the wider energy complex. The front month contract April, lost £5.50/MWh to settle at £113.00/MWh while Summer 23 settled at £119.50/MWh, a price not seen since February of last year. GB baseload for day ahead delivery settled at £114.52/MWh, £17.17/MWh lower on the day. The EUA carbon market also responded to the latest macroeconomic news and experienced a significant premium release. The Dec 23 contract saw robust selling activity and closed €3.62 lower at €89.25 a tonne.

Oil Market

On Wednesday, the oil market experienced a sharp decline with prices dropping to a low of $72.23 per barrel, the first time it has been this low since 2021. Eventually, the price settled at $73.69. The sudden drop in oil prices was largely driven by concerns over another banking crisis. The Saudi National Bank, which is the largest backer of Credit Suisse, announced that it would not provide any further assistance to the bank after it disclosed “material weakness” in its accounting controls. In addition to this, the US Energy Information Administration reported an inventory increase of 1.6 million barrels, adding to the downward pressure on a market that is already unstable due to recession fears.

Markets this morning

The NBP gas market has opened soft once again ahead of the Irish bank holiday, as prices continue to push lower this morning. April, the front month contract last traded at 104.52p while Summer 23 is currently at 108.40 pence per therm. Momentum in the prompt market is following a similar pattern, with the Day ahead contract last trading at 101.15p per therm. Strong Norwegian imports and LNG flows are supporting the UK gas system which is currently balanced. Brent crude prices have opened higher this morning, last trading at $74.36 a barrel.
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