Growing anxiety surrounding fuel demand pushes oil prices lower

12 May 2023

Gas Market

UK gas contracts displayed a mixed pattern of movement yesterday, but overall prices remained stagnant, failing to surpass the 1.00p threshold. The font of the curve remains in negative territory based on the five day moving averages, while further dated contracts are still holding risk premium. The front month contract June settled at 80.75p, up 0.19p on the day while Winter 23 gained 0.35p to settle at 141.81p. Price movement in the prompt market was marginally more dynamic compared to the curve, however the session as a whole remained uneventful. The Day ahead contract dropped 3.00p to settle at 78.50 pence per therm while the Within day contact closed 2.45p lower at 81.05p. Ample wind generation significantly reduced gas demand for power, contributing to the decline in prices.  

Power Market

Yesterday’s session in the GB baseload power market witnessed relatively stagnant movement. With the five day moving average for the majority of contracts at only £.025/MWh, which suggests the market has reached a level of stability. The front month contract June settled at £89.00/MWh, up £0.27/MWh on the day while Winter 23 shed £0.75/MWh to close at £151.00/MWh. Baseload for day ahead delivery settled at £87.30/MWh yesterday, down £9.11/MWh as robust wind generation supported the downturn. EUA carbon prices pushed lower yesterday also, with the Dec 23 contract hitting at intraday low of €87.75 before closing at €88.40 a tonne.  

 Oil Market

Global oil prices continued their downward trajectory yesterday, experiencing losses exceeding $1.00 per barrel for the second consecutive session. The primary driver behind this downward trend is the growing anxiety surrounding fuel demand, primarily stemming from economic uncertainties in the world’s largest economies, China and The U.S. The United States government is currently facing a significant hurdle as discussions regarding the debt ceiling have hit a roadblock. The debt ceiling represents the maximum amount of money that the government can borrow to meet its financial obligations. Furthermore, recent data from China indicates a decline in business loans and sluggish economic growth, further reinforcing worries about fuel demand. Brent crude settled at $74.98 a barrel, down $1.43 on the day.  

 Markets this morning

Prices in the UK gas market have opened lower this morning, with the front month last trading 1.25p down at 79.50 pence per therm while Winter 23 last traded at 139.50p, a price range not witnessed since mid-March. NBP prompt prices are yet to trade, however the gas system has opened balanced. Three LNG cargoes are confirmed to arrive into the UK over the weekend while exports to mainland Europe remain strong. Brent crude has opened in negative territory this morning, with the front month last trading at $74.34 a barrel.
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