The Brent crude front month contract has slipped this morning

01 August 2023

Gas Market

The UK gas market witnessed a turnaround during Monday’s session, initially heading towards another day of losses but later experiencing a shift in sentiment, resulting in a modest bounce in prices by late afternoon. Despite healthy near-term fundamentals, the market seemed to overlook them once again, as the Sep-23 contract which gained front month status edged up 3.02p to settle at 70.75 pence per therm, similarly Winter-23 moved up 3.01p to end the day at 120.49 pence per therm. Further along the curve, day on day increase were relatively insignificant. The UK prompt market also climbed higher yesterday, primarily driven by a short maintenance notice at the Norwegian gas field Troll. The maintenance work was forecast to curtail day-ahead deliveries by 29MCM, which exceeded the initially planned volume of 17MCM. Overall, the Day ahead contract averaged at 72.58p throughout July, a decline of 4.62p from June.

Power Market

A modest uptick in the UK gas prices filtered into the GB baseload power market during Monday’s session. Despite the marginal increase in prices, contracts across the curve remained in negative territory over a five day price movement  average. The front quarter Q4-23 took the brunt of the upward pressure, shifting £3.00/MWh higher to close at £115.35/MWh, while Winter 23 settled at £116.50/MWh. The GB power market was able to withstand losses in the carbon market yesterday, as the EUA spot lost €2.30 to settle at €84.95 while the benchmark contract Dec 23 moved €1.94 lower to close at €86.76 a tonne. Sustained selling pressure throughout the day supported the downward momentum.

Oil Market

In Monday’s session, the global oil markets demonstrated resilience as they continued their upward momentum, propelling the front month to trade at $2.10  per barrel higher over a five-day average. The front month contract settled at $85.56 a barrel. The recent increase represents the largest monthly gain in the market since January 2022, underscoring the current bullish sentiment .One of the key factors driving the price is the tight supply situation prevailing in the market. Additionally, macroeconomic indicators have shown improvement ,which has improved  market confidence as demand forecasts continue to strengthen also. Notably, Saudi Arabia, a significant player in the global oil landscape, is anticipated to extend its current production cuts of 1 million barrels per day into September. This move by Saudi Arabia signifies its commitment to keep the global oil supply tight.

Markets this morning

NBP gas prices picked up where they left off this morning, opening in positive territory. However it appears the upward pressure is short lived, as the front month contract Sep-23 opening at 73.85p but last trading at 71.45 pence per them.  Further along the curve, prices are displaying a negative trend, with Summer 24 last trading at 123.75p, down 2.43 pence from yesterday’s settlement. The UK gas system has opened marginally undersupplied, however this is not reflected in the prompt market as contracts are yet to trade. The Brent crude front month contract has also slipped this morning, last trading at $85.20 a barrel, down $0.36 from yesterday’s close.
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