EUA carbon prices took a hit yesterday

23 May 2023

Gas Market

Price movement in the UK gas market was limited yesterday, however the recent downward trend along the front of the curve resurfaced. The front month contract June dipped to a low of 64.11p before crawling back some of the losses to settle at 66.36p down 2.00p on the day. Weakness along the far curve was also evident in the early hours of trading but the seasonal contracts reverse the losses in the afternoon to close just shy of 1.00p higher on the day. The recent decline in gas prices has occurred earlier than anticipated, which is primarily linked to subdued demand and stable gas injection, storage levels across Europe are at 62% fullness, 21% above the five-year average.  Weakness in the UK prompt market persists, with the NBP Day Ahead index contract settling at 65.07, an 8.42p discount to the Dutch TTF equivalent.  

Power Market

GB baseload power contracts took a step-down during Monday’s session, as weakness in the wider energy mix including gas and carbon fed into the downward momentum. The front month contract June broke the £80.00/MWh mark to settle at 79.60/MWh while Winter 23 ended the session £1.75/MWh lower at 139.75/MWh, a price not seen since before the energy crisis. GB spark spreads have continued to unravel, with Summer 24 and 25 trading in negative territory, at -£1.22 and -£2.49 respectively. EUA carbon prices took a hit yesterday, with the Dec 23 contract shedding €2.18 to close at €87.25 a tonne. The outlook of increased supply pressured the market.  

Oil Market

Global oil prices opened lower on Monday, as the market continues to feel the pressure from weak economic indicators. Oil markets were focused on the US default risk which has offset a forecasted uptick in demand outlook, particularly in Asia. Until the US government reach a deal, volatility is expected to remain rife within the market. The front month contract has traded at $75.33 a barrel in May on average, $7.93 below the previous monthly average. Despite this weakness, last week crude oil benchmarks gained approx. 2%, their first weekly increase in five weeks as confidence increased that the US will not default. Brent crude settled at $75.99 a barrel yesterday, up $0.41 on the day, led by seasonal increase in US demand ahead of peak summer fuel demand season.  

Markets this morning

The NBP gas market has picked up where it left off yesterday, with contracts opening in negative territory. The front month June last traded at 65.63p, down 0.73 pence while Winter 23 has shed 1.04p to last trade at 124.25 pence per therm, a pre-energy crises price range. Movement in the prompt market is flat with contracts yet to trade. However, this is likely to change swiftly as the gas system is 20MCM undersupplied. The impact of planned maintenance at the LNG regasification facility Isle of Grain and Norwegian gas infrastructure will likely be reflected in prompt gas prices as the day progresses. Brent crude front month last traded at $75.79 a barrel, down $0.20 from yesterday’s close.
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