EUA prices peaked at the highest level in five weeks yesterday

27 July 2023

Gas Market

NBP futures eased as risk premium eroded on Wednesday, cancelling out most of the gains seen earlier in the week as fundamentals remain strong with storage levels above 80% fullness, robust Norwegian flows into the UK and LNG deliveries expected to increase over the next two weeks. The front of the curve took the main brunt of the downward pressure, briefly opening higher and trading as high as 86.00p per therm, but after a sharp downturn in the afternoon, settling at 73.24p per therm, down 8.15 p/therm on the session. When we look at the five-day price movement, the front two months are still up around 5.00p despite yesterday’s decline while further out the curve is relatively flat. On the prompt, the Day ahead contract came off its recent highs after 7 consecutive positive days, settling down 7.97 pence per them on the day at 78.80 p/therm as British wind output was forecast to more than double day on day.

Power Market

GB baseload power contracts tracked the UK gas market and carbon declines across the curve during Wednesday’s session. The front month contract August felt the brunt of the downward pressure, settling down £6.00/MWh, closing at £75.00MWh. Baseload for day ahead delivery settled up £0.98/MWh at £84.40/MWh despite higher wind forecasted for the period. EUA prices had peaked at €93.53 a tonne, the highest level in five weeks in early trading, but ended the day in negative territory, settling at €90.75 after Commitment of Traders data showed that investment funds have boosted their net long positions.

Oil Market

Brent crude oil dipped from recent highs on Wednesday, after U.S crude inventories fell less than expected and the Federal Reserve raised interest rates by a quarter of a percentage point. The rate hike was the Fed’s 11th in the last 12 meetings and the statement after left the door open to another increase which would increase borrowing costs for businesses and consumers and could slow economic growth and lower oil demand.  U.S. crude inventories fell by 600,000 barrels in the week ended July 21, which was well below estimates. The market expects Saudi Arabia to rollover its August output cuts to September, however sources are saying that Russia is expected to significantly increase oil loading in September, bringing to an end steep export cuts. The front month September contract settled at $82.92 a barrel, down $0.72 on the day.

Markets this morning

The UK gas market continued to soften this morning with near futures falling between 1.00-2.25p. The front month August-23 is currently trading down 2.10 p/therm at 71.14 pence per therm while further out the curve there has been limited trading with none of the seasons trading yet. On the prompt, the day ahead contract has opened lower at 70 pence per therm as the UK gas system has opened slightly oversupplied this morning with demand forecast at 177 mcm for the day. Brent crude oil has opened higher at $83.67, up $0.75 a barrel.  
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