Crude oil markets awoke to a surprise announcement from OPEC

03 April 2023

Gas Market

Forecasts for a drop in wind generation for the week lifted NBP prompt products on Friday while near curve contracts also edged higher on the day.  Generation from wind has averaged almost 10GW for the last week and latest forecasts for the week ahead are for wind to fall to around 5.5GW on average.  This is likely to push up gas demand for power generation and the week ahead contract gained 10.80p on Friday with the day ahead closing a similar amount higher at 116.75p.  May took up the front month status on Friday and gained 9.93p to settle at 118.03p. Winter-23 is the new front season contract and settled at 151.82p, adding 11.02p as concerns for LGN supplies mount.  GB LNG reserves remain below the levels in stock at this time last year with potential competition from China for supplies adding to concerns.

 Power Market

Baseload futures rose for a second session on Friday consolidating the marginal rise from Thursday.  The April contract settled at £116.00/MWh, posting a gain of £4.50/MWh on it’s last day of trading. The summer contract which also expired on the day, added £4.45/MWh to close at £122.20/MWh.  Baseload for the day ahead edged higher on Friday but gains were modest despite forecasts for wind generation to average around half of the levels for the last week. The contract settled at £115.00/MWh, up £2.95/MWh on the previous settlement.

  Oil Market

Crude oil prices settled up on Friday and ended higher for the second week running.  Brent for May delivery settled at $79.77 a barrel, gaining 50 cents on the last day of trading for the contract but the much more heavily traded contract for June rose by $1.29 to settle at $79.89 a barrel.  Concerns of tight supplies and hopes the U.S. Federal Reserve will ease the level of interest rate increases were behind the gains on the day.  Restrictions of flows from the Kurdistan region added to the upside earlier last week while latest surveys of OPEC’s output was 28.9m barrel per day for March, down around 70,000 barrels per day from the previous month.

 Markets this morning

The crude oil markets awoke to a surprise announcement from OPEC indicating that the group intends to cut output by a further 1.16m barrel per day. The announcement came ahead of the groups virtual meeting, which is to include Saudi Arabia and Russia, all expectations were for the group to largely maintain the current level of output.  Crude oil prices surged with the June contact hitting $86.44 a barrel earlier, but the latest trade was at $84.28 a barrel, up $4.39 from Friday’s close.  In the GB gas markets, prompt prices are around 3.50p higher, while on the curve, earlier losses have been reversed and the May contract is 4.68p up at 122.71p.  
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