Risk premium continued to fall from the front of the NBP curve during yesterday session, marking four consecutive days of losses in the gas market. One significant factor contributing to this bearish trend is the recent decrease in Asian LNG prices , which have hit their lowest levels since May 2021. This has incentivized large volumes of LNG to be diverted to Europe, which has been a critical substitute for the absence of Russian gas since the invasion. The UK is expected to receive 15 LNG cargoes this month, compared to nine in May of last year. The front month contract for June settled at 80.51p yesterday, which is its lowest level since January of 2022. Meanwhile, the front season for Winter 24 closed at 140.11p, marking its lowest level since March of 2022. This represents a significant discount from its peak of 722.96p in August of last year.
Yesterday marked the fifth consecutive session of losses for the GB baseload power front month contract. The June contract settled at 87.75/MWh, down £7.60 over the last five days of trading. Additionally, there has been a widening gap between Q3 23 and Q4 23, as a level of uncertainty is curtailing losses for the final quarter of 2023. The Spark spread for Q3 23 is currently £15.55/MWh below Q4 23. EUA carbon prices extended their losses yesterday, reflecting the weak fundamentals affecting the overall sentiment. The Dec 23 contract lost €0.63 to settle at €84.53 a tonne, while the spot contract settled at €82.55 its lowest level since the 20th of January.
On Thursday, the oil market recovered after falling sharply for two consecutive sessions. The market looked set to fall further in the early hours of trading, however, the losses were curtailed by the European Central Bank’s decision to slow down the pace of its interest rate hikes. This move indicates that the current tightening cycle is approaching its final stage. Brent crude front month experienced a dip to a low of $71.28 before it managed to regain some value and settle 17 cents higher at $72.50 a barrel. Global demand growth remains the key fundamental factor influencing the sentiment, as recession fears continue to linger. All eyes remain fixated on China as it is expected to reignite its economy and counterbalanced the recession fears.
Markets this morning
Despite a slightly under supplied gas system leading up to the UK Bank Holiday, prompt prices have pushed lower this morning. The Within Day and Day Ahead contracts last traded at 81.00p and 80.00p respectively. While the NBP curve contracts have followed yesterday’s downward trend, the price movement remains limited. The front month traded at 80.43 pence per therm, and the Winter 23 contract has exceeded the 140.00p threshold, last trading at 139.50 pence per therm. Movement in the Brent crude market is moving in the opposite direction as the commodity attempts to recovery some of its heavy losses this week, the front month last traded $1.10 higher at $73.60 a barrel.