The sharp decline in gas futures on the NBP weighed on the GB baseload curve

04 July 2023

Gas Market

The gains recorded at the end of last week by the NBP curve were reversed yesterday after the market opened firmer on Monday.  The new front month, August, traded up to 97.84p per therm early in the session but gains were not sustained, and the contract traded down to 82.85p before closing at 83.65p with a loss of 7.57p.  Market sentiment improved with European gas reinjection for storage being well ahead of schedule as reserves approach 80.0% full.  There’s the possibility that up to 5 LNG tankers are bound for the UK this month, while these have yet to be confirmed it would still be 2 less than was received during Jul-22.  GB gas demand for the week is set to ease as wind and solar generation is forecast to rise over the week and this pressured the prompt yesterday with most products shedding over 7.00p.  

Power Market

The sharp decline in gas futures on the NBP weighed on the GB baseload curve on Monday. The new front month, August settled £4.25/MWh down at £90.25/MWh, while the Winter contract shed £5.50/MWh to close at £127.25/MWh.  Wind generation is set to increase later in the week but is forecast to ease on Tuesday which propped up the Day ahead contract yesterday and settled at £91.62/MWh. The UKA Carbon prices jumped by around 6.3% yesterday as the UK government announced a new cap to tighten industrial emissions.  EUAs went in the opposite direction and fell by an average of 2.0% with the Spot settling at €86.00 per tonne, down €2.00.  

Oil Market

Concerns of a slowing global economy vied with extended production cuts announced by Saudi Arabia on Monday and won out as crude oil prices eased on the day.  Saudi Arabia has voluntarily cut their production by 1 million barrels per day from 01-Jul and confirmed yesterday this will be continued for the month of August.  Russia is to reduce exports by 500,000 barrels per day from 01-Aug to boost prices according to Alexander Novak, the Russian Deputy Prime Minister. These efforts failed to convince the market on Monday as concerns that the U.S. Fed and ECB will both raise interest rates this month grow. At the close of play, the September contract for Brent was 76 cents a barrel down at $74.65 a barrel.  

Markets this morning

After a sticky opening to trading this morning near futures have started to ease with the front month down 1.12p at 82.70p having traded up to 85.29p earlier.  The Winter contract is also marginally lower at 127.75p on the last exchange.  There have been no trades agreed on the prompt screen thus far and gas demand for the day is forecast down at 124mcm with supplies a touch long.  Norwegian gas flows to the UK remain curtailed by maintenance works at the Nyhamna and Ormen Lange facilities which are due for completion in mid-July according to Gassco, the Norwegian gas operator.  It’s the U.S. Independence Day Holiday, but crude oil prices are higher as the market weighs the impact of the production cut by Saudi Arabia.  
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