Following the long weekend in the UK, early trading was thin with the front month opening strongly, up by over two pence per therm on expectations of lower wind generation. However, a choppy session saw prices across the curve fall in the late morning before reversing course in the late afternoon. Forecasts of elevated temperatures and the continued strong LNG outlook eventually outweighed the weak wind electricity generation data with all monthly and quarterly contracts falling by the close. The front month contract fell by 1.12 pence per therm while the front season, covering the period to March-24, bucked the downward trend. Curve prices from 2024 onwards all edged higher due to the risk of there being insufficient gas to meet demand next year, with LNG still likely playing a key role in global pricing.
A lack of wind on the GB electricity system sent day ahead prices higher, increasing by over 6% day on day trading at £94.10 per MWh. Wind is forecast to be low for the remainder of the week that is likely to cause GB baseload day ahead and NBP gas day ahead to remain strong. NBP gas curve all strengthened yesterday which subsequently fed through to GB baseload prices. GB baseload curve prices are strongly correlated to NBP curve prices, and the increase across 2024 on gas was reflected in the power markets. Both Winter-23 and Winter-24 gained £1.65 on last Friday’s close being assessed at £150.10/MWh and £141.15/MWh respectively.
On opening oil prices declined driven by a combination of disappointing Chinese import data, concerns over U.S. economic growth, banking sector turbulence, and debt-ceiling negotiations before rebounding in late trading. Opening in negative territory, Brent crude fell as low as $75.30 a barrel before traders reacted to the US government’s plan to refill the nation’s oil reserves and expected higher seasonal demand pushed the front moth higher to $77.44 a barrel. The market initially reacted to the latest data from China showed its import had contracted sharply in April, while exports had increased at a slower pace, further indicating weak domestic demand however this was countered by news from the U.S. The Biden administration plans to begin purchasing oil to replenish reserves while the EIA reported an anticipated increase in demand and a reduction in its output estimates for this year and next when compared to its previous estimates.
Markets this morning
UK gas markets are slightly more active this morning with yesterday’s trends persisting. Near term contracts have all traded as far as October and have done so marginally lower or flat to yesterday’s close. Winter-23 continues yesterday’s price increase with the latest traded price up 2 pence. Nothing further on the curve has traded at the time of writing. Oil has declined from lasts nights close, down a dollar flat at $76.44 a barrel. Dec-23 carbon is up again today following a strong session on Tuesday. A reduction in EUA’s for next week’s auctions is currently providing strength to the carbon market.