Tuesday was a choppy session on the NBP gas market

05 July 2023

Gas Market

Tuesday was a choppy session on the NBP gas market with prices lacking clear direction for much of the day. Looking at recent price swings and day on moves, yesterday’s close was essentially flat. The front month opened in positive territory, trading to what looked like being the intraday high of 85.29 pence per therm for much of the day. Across the late morning and early afternoon prices retreated, falling to the lows of the day as some Norwegian maintenance was completed and it looked as if the supply picture was improving. However, a late rally before the close saw prices of traded contracts increase and hit their intraday highs. August closed the session up 3.13p at 86.78p. The front winter followed a similar path opening at 128.00p, pushing through the peaks and troughs of the market to finish the day at 131.99p, a gain of 3.52p day on day.  

Power Market

GB Baseload curve contracts broadly followed the gas market movements across Tuesday’s session. The front month and front season both made minimal gains following the late rally on gas markets as the lack of LNG arriving into the UK caused a spike on the NBP just prior to the close. Day ahead prices fell across the session pressured by an expected increase in renewable generation on the system. Both wind and solar generation are expected to be 10-20% above seasonal norms. European carbon markets had little impact on baseload movements as thin trading, likely due to the Independence Day holiday in the US, caused the market to move sideways.  

Oil Market

The front month Brent oil contract increased by $1.60 to close at $76.25 per barrel on Tuesday as market participants considered the impact of supply cuts announced by major oil exporters Saudi Arabia and Russia for the month of August. Saudi Arabia declared its intention to extend its voluntary output reduction of 1 million barrels per day (bpd) until August, while Russia and Algeria volunteered to decrease their August output and export levels by 500,000 bpd and 20,000 bpd, respectively. Despite this bullish movement, concerns persisted over the weak global economic outlook. Recent business surveys have indicated a decline in global factory activity due to low demand in China and Europe. In addition to this U.S. manufacturing experienced a further decline in June, reaching levels not seen since the initial wave of the COVID-19 pandemic.  

Markets this morning

Prices opened up by approximately 1.00p in initial trading this morning, before immediately falling off. The near curve contracts are currently all trading in negative territory. Prices have at this stage reversed more than half of yesterday’s gains despite supply being 8mcm less than anticipated demand today. Day ahead has traded slightly up reflecting the short system with within day yet to trade. Oil too has lost some of its upward momentum as prices have traded lower this morning. Oil markets are currently stuck between supply cuts and falling demand due to weak global economic data and the prospect of further interest rate hikes in the US and Europe.  
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