A clear downward trend was witnessed in the UK gas market yesterday, as risk premium unravelled from the front. The front month contract August-23 displayed the largest daily price movement in over 15 sessions, shedding 8.33p to settle at 73.53 pence per therm. Market sentiment remained focused on Norwegian gas flows. With the expected return of Nyhamna on the horizon, the market appears to be realigning with the actual fundamental picture. Yesterday’s losses were sustained across the far curve, which hasn’t been a common theme this summer. Seasonal contract for 2024 lost 7.77p on average. UK prompt contracts also retreated, with the Day ahead contract breaking the 80.00p price mark, to close at 72.20p. The UK gas system has continued to remain relatively balanced, despite low levels of LNG send out compared to the previous month.
Taking direction from the gas market, GB baseload power contracts flipped into a downward trend on Monday. The front month contract August settled at £80.00/MWh, down £10.25 over a five day average, while Winter 23 ended the day 5.50/MWh lower at 121.50/MWh, its lowest level since June 8th. The UK spark spread market remains weak, which has supported the erosion of risk premium in the GB power market. Baseload for day ahead delivery closing £6.45/MWh down at £81.35/MWh. European carbon prices have recently lacked clear direction, yesterday was no exception. The spot contract gained €0.11 to close at €84.55 a tonne, down €12.65 from its yearly peak of €97.20 in February.
Oil markets kicked off the week in negative territory, with the Brent crude front month dipping to a low of $77.55 a barrel. Weak macroeconomic data from China and the US filtered into the downward sentiment. The increasingly troublesome state of the world’s second-largest economy, China, is generating concerns as signs of a stagnant recovery emerge. Meanwhile, across the Atlantic, the probability of additional interest rate hikes in the US looms, reflecting the nation’s ongoing struggle with inflation. Losses were mitigated yesterday by comments made by the head of the International Energy Agency, who stated that the oil market are forecast to remain tight. The Brent crude front month eventually settled at $77.69 a barrel, down $0.78 cents on the day.
Markets this morning
The downward momentum witnessed yesterday has carried over into this morning, as UK gas contracts open in negative territory. The benchmark contract Winter-23 has recorded a loss of 4.14p, last trading at 122.00p. In contrast, the front month contract has seen less pronounced losses, currently trading at 71.88p, down 1.65 pence. Despite an undersupplied UK gas system, the tightness in the system has not yet translated into prompt prices, as contracts have yet to trade. In the wider fuel energy mix, carbon has opened weaker, as the Dec 23 contract last traded €1.07 lower at €85.23 a tonne. Brent crude is making efforts to recover from yesterday’s losses, last trading at $77.92 a barrel.