What appeared to be a quiet day on gas markets exploded into life at the close

28 June 2023

Gas Market

For the majority of the day the market was benign remaining flat day on day with little to no movement. However, just before settlement the market sparked into life with all traded contracts reaching their intraday high. The front month, July, eventually settled at 85.16 pence per therm, and increase of 5.43p day on day. the reason behind the price spike was far from clear, with a likely explanation a price increase was needed to attract LNG cargos. LNG send out from British facilities has been low recently, with the glut of cargos from May giving way to a dearth of cargos across June. At present there are only two cargos currently confirmed to berth UK regassification facilities between now and the 8th of July. The movement on the front month fed into all contracts as prices all gained momentum late afternoon, with Winter 23 increasing by 2.55p closing at 130.66p.  

Power Market

GB baseload contracts regained some of the premium lost over the last week, tracking the NBP gas markets, although gains were limited as the UKA carbon December contract fell by 1.7% on Tuesday’s session. The benchmark contract Winter 23 gained £2.25/MWh to settle at £128.75/MWh. The front month contract July gained £2.50/MWh, however it is still down £5.50/MWh on a five-day average. GB baseload for day ahead delivery was relatively flat on the day, edging £0.52/MWh higher to settle at £94.95/MWh. EUA carbon contracts moved in the opposite direction to UKA carbon contracts, tracking German power and TTF gas prices with the Dec-23 contract closing at €89.00 a tonne, up €2.50 on the day.  

Oil Market

Signs that the ECB is not done with interest rate hikes yet caused global oil markets to slide by over 2% on Tuesday’s session. European Central Bank President Christine Lagarde said that stubbornly high inflation will require the bank to avoid declaring an end to rate hikes. Higher interest rates can stall economic growth and lower oil demand. In the United States, U.S. consumer confidence increased in June to the highest levels in over a year, however the upbeat data suggested the Federal reserve will have to continue raising interest rates to slow demand in the overall economy. The U.S central bank signaled earlier this month that two additional rate hikes were warranted this year.  The Brent crude front month settled at $72.26 a barrel on Tuesday, down $1.92 on the day while WTI dropped by $1.67, to settle at $67.70 a barrel.  

Markets this morning

Prices have opened in decline this morning following the late rally last night. The supply and demand picture is relatively unchanged day on day with the system 7mcm short, and demand buoyed by a fall in UK wind generation. The consistent supply and demand picture has meant that prompt markets are flat day on day. The front month last traded at 83.5p, a penny above its low, but 1.66p lower than last nights close. Further along on the curve the trend has continued with the front two seasons both falling from last night’s highs. Oil has continued its decline, with early trading posting a loss of $0.46 a barrel while carbon too has fallen following gains across yesterday’s session.  
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