UK gas prices extended their upward trajectory for the second consecutive session yesterday, with gains primarily observed at the front of the curve. Interestingly, the market seemed to disregard robust near-term fundamentals, despite Norwegian gas production reaching a nearly four-month high and European storage levels now above 80% fullness, ahead of its target. The front month contract August-23 surpassed the 80.00p price mark to settle at 81.39 pence per them, the contract has traded at an average of 73.40p throughout July. The front season Winter-23 moved up 2.65p to close at 131.80p while seasonal contracts for 2024 shifted 1.92p higher. Despite a balanced gas system, NBP prompt contracts bounced higher yesterday, with the Day ahead contract edging up 4.55p to close at 79.05p, its highest price in 15 sessions.
The rise in contracts at the front of the NBP futures curve fed into the baseload curve on Tuesday while higher carbon was also a contributor to the gains further out. The front month contract added £2.25/MWh yesterday to close at £81.00/MWh, and the Winter settled at £123.80/MWh, up £1.95/MWh. The Dec-23 contract for Carbon EUAs gained just over a euro to close at €92.40 per tonne.Forecasts for wind generation to increase next week curbed gains to the prompt yesterday. Baseload for the day ahead settled marginally higher at £83.42/MWh. Wind generation is expected to average over 6.2GW for the next couple of weeks according to latest data from the MetDesk
The front month for Brent settled 90 cents a barrel higher yesterday, closing at $83.64 a barrel, the higher settlement for the global benchmark for three-months. The U.S. benchmark, West Texas Intermediate settled at $79.63, up 89 cents a barrel. Pledges from China’s leaders to step up policies to address the slow recovery added to the upside yesterday as focus will be on expanding domestic demand. Supplies are expected to tighten next month with output cuts from OPEC+ after Saudi Arabia and Russia committed to decrease production and exports. Concerns of further interest rate increases on both sides of the Atlantic limited the upside to crude prices yesterday.
Markets this morning
Near curve contracts for the NBP continued to edge higher after opening this morning as August peaked at 86.00p per therm before falling back to almost flat. The latest trade for the front month has gone through at 81.52p which is down 4.48p intra-day or just 0.13p above last night’s close. The Winter contract is flat at 132.00p with next trades based on the bid/ ask spreads likely to be in negative territory. Supplies are forecast ahead of today’s demand of 179mcm, but the prompt market has opened a touch firmer. Brent is down from yesterday’s three-month high at $83.21 a barrel.