UK gas contracts appeared to be on track for a day of losses yesterday, but towards the end of the session, some far curve contracts, including Summer 24, managed to reverse the losses and concluded the day with gains. Bearish pressure long along the near curve had once again arose from robust LNG regasification, strong Norwegian production levels and already damaged demand levels dropping further amid improved weather conditions. The front month contract May lost 4.43p to settle at 90.41p its lowest level this year. Gas for delivery in the remaining months of the year lost 3.39 pence per therm on average yesterday. Prompt prices followed a similar downward trajectory yesterday with the Day ahead contract losing 7.10p to close at 90.50p. If prompt contracts dip below the front month contract it will incentivize storage injections to ramp up and mitigate risk.
Losses in the UK gas market coupled with weaker carbon prices filtered into the GB baseload market during yesterday’s session. Near curve contracts took the brunt of the downward sentiment, with Q3-23 shedding £3.63/MWh to close at £104.00/MWh. The front season, Winter 23 ended the session at an over 20 day low of £145.10/MWh. Further along the curve price movement was limited. Baseload for day ahead delivery settled at £100.08/MWh yesterday, down £12.40/MWh. Losses in the wider energy complex alongside financial markets pressured EUA carbon prices, Dec 23 contract lost €0.55 to settle at €86.25 a tonne.
Global oil markets continued to trend negatively for the second consecutive day on Wednesday. Despite falling U.S. oil inventories, recession fears seem to be overshadowing any bullish indicators in the market. When U.S. oil inventories fall, it indicates a higher demand for oil than available supply, which typically leads to higher oil prices. However, this positive market signal is being countered by fears of an economic downturn, as both the U.S. Federal Reserve and the European Central Bank are expected to raise rates at their upcoming meetings. Russian oil refineries continue to increase output, as they delay routine maintenance to cash in on profitable margins. Russia has significantly diversified its fuel sales since the EU embargo.
Markets this morning
Limited price movement has been recorded in the UK gas market this morning. Prompt contracts are yet to trade while the front month last traded at 90.50p per therm, broadly in line with yesterday’s settlement. The gas system has opened fractionally over supplied with demand forecast at 256 MCM. Exports to continental Europe remain strong, with IUK exports nominated at 47MCM whole BBL is at 35MCM. Brent crude prices have opened higher this morning after yesterday heavy losses. The front month last traded just shy of the $80 a barrel mark. EUA carbon prices have also opened in positive territory this morning, the Dec 23 contract last traded at €87.50 a tonne.