It’s been a volatile opening to the NBP futures market

Gas Market

Prompt prices for the NBP dropped in value on Thursday with GB gas demand expected to ease as wind generation increases going into the weekend. The Spot fell by 5.20p per therm on the day while Friday’s price declined by 4.95p.  The threat of industrial action by workers at Australian LNG plants still lingers while talks for a resolution drag on and futures were little moved on the day.  Apart from the front month, the NBP curve generally settled less than a penny down from Wednesday’s close.  There has been some release of premium from the September contract this week, but seasonal contracts have retained the risk premium due to the strike threat and this is evident with Summer-24 closing at 134.21p, almost the same price as the winter-23 contract while summer months for 2023 have averaged around 80.28p so far.  

Power Market

With gas futures on the NBP edging marginally lower and carbon prices for EUAs and UKAs ticking up slightly it was a mixed day for the GB power market. Near curve months ended the session with modest losses while the Winter-23 contract settled £0.25/MWh higher. The September contract declined by £1.75/MWh closing at £88.75/MWh but is on target to post an increase week-on-week. Forecasts for wind generation to rise above 10.5GW on Friday pressured the prompt yesterday as baseload for the Day ahead shed almost £6.00/MWh to settle at £81.03/MWh. Wind generation has averaged over 7.0GW for the last week, covering almost 25% of UK demand.  

Oil Market

Crude oil prices settled higher for the first time this week on Thursday after China pledges to maintain policies to support economic recovery.  The Chinese government have been promising to reignite their economy for some weeks now on the back of a streak of disappointing results but yesterday the world’s second largest oil consumer dipped into its crude oil reserves for the first time in almost three years. This indicator of increased demand was reinforced by the U.S. government’s latest report showing U.S. gasoline stocks fell to the lowest level in close to two months last week as the end of the summer driving season approaches. A weaker dollar also provided some support to crude oil prices yesterday after the U.S. Fed didn’t dismiss the prospect of further interest rate hikes earlier in the week.  

Markets this morning

It’s been a volatile opening to the NBP futures market this morning with near month contracts moving higher out of the blocks but retreating in later trades.  The September contract traded up to a high of 96.40p and is down almost 5.00p intra-day with the latest exchange just above the low of the day at 91.52p.  Longer curve contracts have yet to open but the bid/ ask spreads for the front two seasonal products have narrowed to a range of +/- 1.50p to last nights close. The prompt has still to get under way, but the GB gas system is in good shape with the National Grid showing a surplus of 10mcm.  Brent has continued to ease with the October contract down 29 cents a barrel.  

 

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