A mixed day for near curve contracts saw some contracts increase in price while most notably, June gained value. The front month opened at parity to Monday’s close before trading higher in mid-morning. News of at least six laden LNG vessels confirmed to dock at UK LNG regassification terminals soon pressured prices late afternoon as the price fell by over a penny closing the day at 94.84 pence per therm. Recent below seasonal-norm temperatures have added some further risk premium into the front season and beyond. Withdrawals from storage to cover increasing weather driven demand over the last number of days increased the risk for the coming winter. The contract increased by 1.25p by the close, having traded as high as 144.00p during the day, driven primarily by some mild concerns for storage levels for the coming winter.
A mixed session on GB baseload power markets saw near term prices increase as weak wind generation forecasts fed into a strong prompt market and influenced May and June. The front season winter-23 lacked direction with the market taking a wait and see approach with respect to French Nuclear following fears of widespread corrosion problems. The level of nuclear on the French system impacts the level of imports and exports from the UK to the continent, a key price driver. Prices for the rest of 2023 were also impacted by the recent weakness on carbon markets. EUA price is facing sustained pressure from the lack of buying interest due to the end of compliance season approaching.
On Tuesday, the price of oil hit a monthly low, dropping by 2%, following two days of gains. This was due to growing concerns about a potential economic slowdown and a stronger dollar, which outweighed hopes of increased Chinese demand. The value of the dollar increased due to concerns over corporate earnings and the global economy. Investors are cautious that central banks attempting to curb inflation with potential interest rate hikes could slow economic growth and reduce energy demand in the United States, Britain, and the European Union. The upcoming meetings of the U.S. Federal Reserve, Bank of England, and European Central Bank are all expected to result in interest rate increases. this offset the rise in oil prices due to optimism surrounding increased fuel demand from holiday travel in China and expectations of a drop in U.S. crude inventories.
Markets this morning
Gas prices are in decline across the board this morning. The more liquid May-23 opened in positive territory only for it to fall with an expectation of improving temperatures over the coming days. With forecasts of above seasonal norms for over the weekend and into next week prompt prices have also shed a lot of value in early trading. The decline is not only limited to the front month with Q3 and Q4 contracts losing approximately 4.00 pence and 3.00 pence respectively. Carbon too is falling with buying interest dissipating by the day as the compliance period nears closure. Oil is oscillating near yesterday’s closing price with demand concerns counteracting the drop in U.S. inventories.