The NBP gas market increased over the previous three sessions, with the most recent surge on Monday seemingly influenced primarily by the movement on oil and increased activity due to the recent expiry of three key contracts, April the front month, Q2-23 and Summer-23. Yesterday saw the market take stock of the movements and weighed them against the relatively unchanged market fundamentals and subsequently went into freefall. The front month lost 13.41 pence per therm while Winter-23 the new front season lost just over 10.00p to close at 155.28p. With the fundamentals unchanged the gas market looked to the wider energy complex for support, but oil was relatively unchanged losing the support from the previous day and carbon markets were also weaker.
The GB power market followed movements on the gas market as prices across the curve all stepped lower. The weak European and UK carbon markets were also weighing on GB baseload prices which helped prices to reverse much of the previous day’s gains. The fall on the power market was more muted than the gas market, with price falls limited by the short-term lack of wind generation. Wind generation is forecast to be 20% below seasonal norms for the rest of the week. The lack of wind on the system helped day ahead baseload contracts to increase by £4.00 per MWh at £125.40/MWh despite the fall on the day ahead gas contract.
The oil market saw a volatile session on Tuesday, with prices remaining relatively unchanged, up by a penny at $84.94 per barrel, as investors debated the impact of OPEC+’s plans to cut production amid weak economic data from the US and China. On Monday, oil prices surged over 6% following OPEC+’s announcement of voluntary production cuts from May until the end of 2023. However, the market was spooked by the news of US manufacturing activity falling to its lowest level in almost three years in March, along with weak manufacturing data from China in the previous month, leading to concerns about demand. Furthermore, higher costs for businesses and consumers have also caused fears of inflationary pressures on the global economy from rising oil prices, which may prompt more interest rate hikes.
Markets this morning
Following the volatile nature of the past two sessions the gas market is understandably quiet this morning as traders weigh up the impact of the past two sessions and the real value of gas at present. The front month opened 3.86p lower but has traded to a high of 115.79p and is essentially flat at the time of writing. Oil markets are also muted, with the Brent crude trading just below last nights close at $84.81 per barrel. GB day ahead baseload power markets are also down this morning having shrugged off the lack of wind, and gas prices becoming more influential. Carbon in contrast to the rest of energy markets is robust, with prices up €2.40 per tonne for the Dec-23 contract.