Gas Market
Illustrating the nervousness and risk still in European gas markets, prices declined on Thursday losing value far in excess of the gains they made on Wednesday. With the market on a hair trigger the news on Wednesday of a leak and a LNG plant in Norway caused gas prices to surge. However, the gains were short lived and news that the leak had been fixed on Thursday saw the markets open in negative territory and prices only slid further from that point. July-23 fell by 9.26 pence per therm, to a level lower than last Friday’s close. Likewise, the far cove also fell, pulled lower by the repair but also by a fall in Asian LNG markets. A lower price in Asia means the price in Europe can also fall and still attract cargos to offset the lack of Russian flows. At 105.42p/therm winter-23 is now at its lowest point since the 25th of January 2022.
Power Market
Throughout the month of May UK day ahead baseload prices held an average of £9.59/MWh premium against French power. This helped to highlight the lack of wind through May, but also the impact of nuclear power in France. In May 2022 French power prices held a premium of £52.58/MWh as Europe grappled with a lack of Russian gas and the warming of French rivers limiting their use to cool nuclear generators. Baseload curve prices all tracked NBP and carbon prices lower as the collapse on the gas markets was keenly felt by power traders. Over the last 5 days, despite a spike on Wednesday, the front month July-23 has lost £9.00/MWh or a notable 11.4% as summer prices continue their journey back to pre-crisis levels.
Oil Market
Oil prices experienced an upward movement on Thursday, marking the most significant increase in two weeks. This positive momentum was supported by the House of Representatives successfully passing a bill aimed at suspending the U.S. debt ceiling. This development helped mitigate the effects of rising inventories in the country. The price of oil rebounded, increasing by $1.68 a barrel to close at $74.28, following two consecutive sessions of losses, following the passing of the bill late on Wednesday enhancing the prospects of avoiding a default. The legislation will now proceed to the Senate for further consideration. Oil prices also received a boost as the possibility of the Federal Reserve temporarily halting rate hikes emerged. Currently, investor focus remains firmly on the upcoming meeting of the OPEC+ group scheduled for June 4.
Markets this morning.
Gas prices are stabilising this morning after yesterday’s sell off. July-23, the front month, is up by just over a penny, with August relatively flat. On the curve only winter-23 has traded so far with the last trade going through just above last night’s close. The day ahead market is also slightly up on yesterday’s close, but again the market is showing signs of consolidation rather than the fall continuing or being reversed. On oil the apparent solution to the US debt ceiling issue is having a positive impact on oil prices as the market continues its upward momentum. That coupled with a pause on interest rate hikes in the US is helping oil navigate a path back to $80.00 a barrel.
02 June 2023
