Prices in the UK gas market fell from the front once again

Gas Market

Prices in the UK gas market fell from the front once again, with losses recorded across the curve yesterday. Thursday’s losses further contributed to modest declines when examining the five-day average price movements. Notably Winter 23 is down 18.76p on average after closing at 123.02p yesterday a price level not seen since before the Russian invasion of Ukraine. Nonetheless winter risk in the absence of Russian gas in Europe remains present, as the heavy reliance on LNG is a new dynamic for the market. European gas prices premiums over Asian spot LNG prices have narrowed this week. In the UK prompt market contracts extended their recent downward push which is linked to weak demand and healthy storage. The Day Ahead contract closing at 64.05p, down 7.45p.

Power Market

GB baseload prices saw fresh losses across the curve yesterday, as a weak UK gas market supported the bearish sentiment. The front month contract June settled at £82.25/MWh, down £2.25/MWh. The front season, Winter 23 ended the day at £140.80/MWh, trading at an average of 145.55/MWh so far this month, £11.55/MWh below the previous monthly average. The downward trend in UK spark spreads has persisted, with the Summer 24 contract remaining in negative territory at £-1.40/MWh. EUA carbon prices pushed higher yesterday, buoyed by a tight market. The Dec 23 contract peaked at €90.21 before settling at €89.75 a tonne, up €1.65 on the day.

 Oil Market

Brent crude slipped lower yesterday, as the market took direction from economic uncertainty in the US coupled with sluggish growth in China. Brent crude dipped to a low of $75.52 a barrel, before closing at $75.86, down $1.10 on the day. Despite the efforts of the US President to assure that the government would not default on its debts, the market remained unresponsive.  An uptick in the US dollar yesterday added additional downward pressure, a stronger dollar can weigh on oil demand by making it more expensive for holders of other currencies. Additionally, concerns regarding inflation rates are being factored into the market, as US inflation is not subsiding rapidly enough to allow the Federal Reserve to halt its campaign of increasing interest rates.  

Markets this morning

Liquidity is thin in the UK gas market this morning, a recurring theme on Friday’s. The front month last traded at 69.24p up 1.46 pence while further dated contracts are yet to trade. The UK gas system has opened balanced, as low demand has shrugged off a drop in Norwegian flows as a result of maintenance. Four LNG cargoes are expected to arrive at UK post this weekend, originating from Qatar, US and Algeria. In the wider energy mix prices have opened higher. Brent crude front month last traded at $76.60 a barrel, up 74 cents while the EUA Dec 23 contract is currently trading at €90.27 a tonne.

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