Threat of Hurricane Idalia could hit crude oil supplies in an already tightening market

Gas Market

NBP futures settled marginally higher on Tuesday after markets were closed on Monday for the UK bank holiday when news broke that Chevron’s two major liquefied natural gas (LNG) production facilities in Australia could face daily work stoppages of up to 10 hours next week. Chevron’s Gorgan and Wheatstone projects account for more 5% of global LNG capacity and reports of the potential strike saw the TTF front month September contract spike up over 10% from Fridays close on Monday. This led to a bullish open in the NBP market yesterday with September opening at the high of the day of 98.98 pence per therm, however risk premium slowly unwound as the session progressed and the contract settled at 88.30p, up 1.65p on the day. On the prompt, the spot gained 3.00p day on day while the Day-ahead contract fell fractionally by 0.35p.  

Power Market

GB baseload futures tracked the small price bounce in the NBP gas market on Tuesday however gains were capped due to weaker EUA and UKA carbon markets. The front month September settled at £87.25/MWh, up £1.00/MWh over the session. The Day-ahead contract shed £9.67/MWh due to above seasonal average solar power production and despite lower revised wind generation forecasts. Both EUA and UKA carbon markets contract sold off in the afternoon on Tuesday as some traders discounted the impact of the likely strike in Australian LNG facilities. The Dec-23 EUA contract ended the session at €85.00 a tonne, a decline of 40 cent on the day.  

Oil Market

Brent crude oil rallied more than a dollar on a weaker dollar while Hurricane Idalia intensified as it headed towards Florida’s Gulf Coast, threatening to hit crude oil supplies in an already tightening market. A softer greenback makes dollar-denominated oil less expensive for investors holding other currencies, boosting demand. U.S oil producer Chevron evacuated staff from three Gulf of Mexico oil production platforms ahead of the hurricane however fuel consumption is expected to be lower in the affected regions just ahead of the Labour Day federal holiday on September 4^th. A fire at a Marathon Petroleum refinery last week after a chemical leak ignited two giant storage tanks filled with naphtha heightened supply concerns in the market. The Brent front month October contract settled at $85.49 a barrel, up $1.07 from Monday’s closing price.  

Markets this morning

The UK gas market opened lower this morning, however the front month just entered positive territory at the time of writing. Further out the curve, the Winter-23 contract last traded price is down 1.38p, however the bid ask quotes suggest that the next trade will be above yesterday’s closing price at approximately 130p. Brent crude oil has extended its gains this morning, currently trading up 45 cents on light volume after industry data showed a large decline in U.S crude inventories last week.  

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