UK gas system has opened oversupplied during the last session of March

Gas Market

UK gas futures saw marginal gains during Thursday’s session, with the Winter 23 contract bearing the brunt of the upward momentum. This was primarily due to an increase in risk premium as the European Union warned of a gas shortage for the upcoming winter. This warning was issued in light of a potential rebound in Asian LNG demand, which could reduce availability for Europe. The bellwether Winter 23 contract rose by 5.81p, settling at a two-week high of 140.80p per therm. Yesterday, EU member states reached an agreement to reduce gas demand by 15% compared to the five-year average until March 2024, which marks a one-year extension to their prior objective. This decision had a knock-on effect on NBP far curve contracts, with seasonal contracts for 2024 and 2025 gaining an average of 5.65p per therm.  

Power Market

Marginal gains were noted in the GB baseload power futures market yesterday, in line with the wider energy fuel mix. The front month April gained £1.00/MWh to settle at 111.50/MWh while Summer 23 shifted £1.50/MWh higher to close at £117.75/MWh. Movement in UK spark spread market remains flat which has supported the recent stability in GB baseload power prices. EUA carbon contracts edged higher during Thursday’s session, with the bellwether contract Dec 23 peaking at €91.00 before falling back to settle at $90.80 a tonne, up €0.75 on the day.  

Oil Market

Brent crude front month ended yesterday’s session just shy of $1.00 higher at $79.27 a barrel. Supply constrains was the influencing fundamental during the day, as distributions from Iraq continued to pressure an already tight market. The disruption of oil exports in the Kurdistan region of Iraq is counterbalancing the smaller than expected cut to Russian supplies. Furthermore, a drop in US stocks has also fed into the uptick in prices, as crude inventories for the largest consumer fell by over 7 million bbl. WTI front month followed a similar trajectory yesterday, gaining half a percentage point to end the day at $73.34 a barrel.  

Markets this morning

The UK gas system has opened oversupplied during the last session of March. A fall off in storage injections is the main factor behind the long system. However, prompt contacts have opened in positive territory, with the Day ahead contract last trading 5.95p higher at 112.00 pence per therm. The May contract which has gained front month status has opened 4.09p higher at 112.19p while the new front seasonal contract Winter 23 is yet to trade. Brent crude prices have picked up where they left off and continued to move south in the opening hours of today’s session. The front month contract last traded at $79.20 a barrel.  

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