NBP near curve prices align with healthy fundamentals

11 May 2023

Gas Market

UK gas front months slump lower yesterday, while some further dated contracts move in the opposite direction. Losses on the front curve were attributed by significant storage levels and ample supply, as prices begin to align more closely with the underlying fundamental factors. The front month contract June settled at 80.56p per therm, down 4.80p over a five day average. Seasonal contract for 2024 gained 1.56p on average yesterday, marking three consecutive days on gains. Meanwhile, prices in the prompt market fell yesterday, with the Day ahead contract closing at 83.93p its lowest level since mid-November 2022.  

Power Market

GB baseload power front curve contracts retreat in line with the UK gas market while risk premium remains within later dated contracts. The front month contract June settled at £88.73/MWh down £0.52/MWh while the bellwether contract Winter 23 gained £1.50/MWh to close at 151.75/MWh.  GB spark spread premiums have also extended their downward trend. EUA carbon market gained upward momentum yesterday, with the Dec 23 contract closing €1.97 higher at €89.50 a tonne.  Low auction supply has supported prices, with only two expected next week. GB baseload for day ahead delivery settled at £96.40/MWh yesterday.  

 Oil Market

The oil market witnessed a setback yesterday as an unexpected 3 million barrel build-up in U.S. inventories exerted downward pressure on prices, bringing an end to four consecutive sessions of gains. Sluggish export growth in China has further fueled concerns about global oil demand. The interplay between inventory levels and demand  highlights the delicate balance required for market stability. Global oil markets eagerly anticipate the monthly oil report from OPEC+ scheduled for Thursday, eagerly speculating on whether the cartel will yet again cut production in an effort to bolster prices. Brent crude dropped to a low of $75.83 a barrel before eventually settling at $76.41 a barrel, down $1.03 on the day.  

Markets this morning

Near curve contract continued their downward trajectory during yesterday’s session while seasonal contract for 2024 move in the opposite direction. The decline in the front curve can be attributed to healthy storage levels and an abundance of supply, reflecting a closer alignment of prices with the fundamental factors at play. The bellwether contract Winter 23 settled at 141.46p, down 4.04 pence per therm over a five day average. Losses were also witnessed within the prompt market, with the Day ahead contract at 83.93p, a price level last observed in mid-November of the previous year. Brent crude prices displayed weakness yesterday, breaking a streak of four consecutive sessions of gains. The front month contract lost $1.03 to settle at $76.41 a barrel.
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