NBP contracts take an additional step lower this morning

25 April 2023

Gas Market

UK gas prices started yesterday session in positive territory, however as the day progressed prices began to retreat in line with a healthy fundamental picture and eventually close lower. However, the overall market sentiment remained subdued, with limited price movement observed. Notably, the largest dip in prices was witnessed along the near curve, with contracts for delivery in 2023 losing 2.15p on average. Further dated contracts were not willing to give up their risk premium easily, as a level of uncertainty continues to linger. As of yesterday, European gas storage levels were at 60%, which supported the weakness in NBP prices. In addition, eight LNG cargoes are to arrive at UK ports before month end, with six of them originating from the US. NBP Day ahead contract shed 1.55p to settle at 96.50 pence per therm, a 5.43p discount to the TTF equivalent.  

Power Market

A marginally bearish sentiment prevailed across the GB Baseload power market yesterday. Downward pressure in UK gas prices coupled with weakness in carbon markets supported the losses. The front season, Winter 23 lost £2.25/MWh to settle at £151.25/MWh, a 15-day low. In addition, UK spark spreads also remained weak, adding additional pressure. Baseload for Day ahead delivery settled at £100.07/MWh, down £2.93/MWh on the day. The Day ahead contract’s monthly average for April currently stands at £103.61/MWh, the lowest monthly average so far in 2023. EUA carbon prices recorded losses once again yesterday, with the spot contract settling at €86.25 per tonne, its lowest level since late March.  

 Oil Market

Global crude oil markets closed slightly higher during yesterday’s session, as the market continues to grapple with the supply and demand dynamics. Concerns of a potential global economic downturn have impacted demand forecasts, while the robustness of China’s economy serves as a counterbalance to these worries. Brent crude front month edged $1.07 high to close at $82.73 a barrel. The recent days of trading has seen a deceleration in trading activity within the oil markets, which highlights the cautious sentiment prevalent in the commodity. The latest OPEC+ data reveals that oil exports to India have reached their lowest levels in two decades, due to a surge in Russian seaborne oil to this major global economy. Sanctions have allowed Russian oil to be sold at a significant discount compared to its competitors.  

Markets this morning

Prices in the UK gas market have picked up where they left off yesterday, with NBP contracts taking an additional step lower this morning. However, price movements are marginal with the front month last trading at 94.50p down 0.80 pence from yesterday while Winter 23 last traded at 142.11p down 0.60 pence per therm. The UK system has opened slightly undersupplied this morning, with demand forecast at 281MCM. In the wider commodity market, oil and carbon have both opened in negative territory. The EUA Dec 23 contract last traded at €87.75 a tonne, down €0.75 from yesterday while the Brent crude front month is $0.15 lower at $82.58 a barrel.  
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