The global oil markets began the week with a downward trend

15 August 2023

Gas Market

European gas markets grappled with uncertainty throughout Monday, resulting in a lack of clear direction. An initial uptick across the UK gas curve during early trading subsided in the late afternoon, however losses were marginal on long dated contract as a threat of risk premium persists. Significant volatility was evident in the front month contract, as is often observed, the contract displayed a 9.26p price swing between the high and the low point, before settling at 86.83p per therm. The market’s attention remains fixated on ongoing updates related to the potential LNG workers strike in Australia, with a meeting between the Offshore Alliance Union and facility owners planned for Tuesday 15th. Despite the risk, there has been a noticeable tempering of upward sentiment compared to the initial reaction when the news initially broke last Wednesday.  

Power Market

Risk premium unrivalled from the front of the GB baseload power futures market yesterday, as the front month Sep-23 registered three consecutive sessions on losses after moving £2.45/MWh lower to close at £84.25/MWh. The price spread between the Winter-23 and Summer-24 contract narrowed once again during Monday’s session, with Winter trading at a £6.65/MWh premium. The EUA carbon market posted strong gains yesterday, with the spot contract moving €2.95 higher to close at €87.95 a tonne. The divergence between the Dec-23 UKA and EUA contract continued its expansion, as the UKA product recording a €41.06 discount to the European equivalent.  

Oil Market

The global oil markets began the week with a downward trend, with the Brent crude front month settling $0.60 lower on Monday at $86.21 a barrel. Concerns about China’s weak economic recovery and a strong U.S. dollar dampened the upward momentum that had gradually built up over seven weeks due to supply constraints. The strength of the U.S. dollar adds pressure to oil demand as it raises the cost of the commodity for buyers using other currencies. Meanwhile, Saudi Arabia and Russia’s collaborative efforts within OPEC+ to reduce supply through production cuts are anticipated to deplete oil inventories in the latter part of the year and have the potential to lift the commodity price higher. The front month contract is averaging at $85.80 a barrel in August, a modest $5.64 higher than the previous month.  

Markets this morning

The UK gas market has opened with a clear upward trend. The front month contract has gained 5.36p in the early hours of trading while Winter-23 is up 6.04p at 132.89 pence per therm. Crucial discussions are scheduled today between the Offshore Alliance workers Union and the owners of an Australian LNG facilities, responsible for 10% of the global supply. The outcomes of these talks are poised to have a substantial influence on today’s market sentiment. The oil markets have continued their downward push this morning, with the Brent crude front month last trading at $86.12 a barrel, down $0.09.    
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