Oil prices continue their recent upward trend

06 September 2023

Gas Market

Tuesday saw prices take stock of Monday’s sell off as a choppy market closed the session with minor increases across the board for all forward contracts. The market fell in early trading as the sell off looked likely to continue across the day. However, news reached the market by lunchtime that the strike action at the Chevron owned Australian LNG facilities was likely to go ahead. Notice was served by unions of the workers intention to go on a total strike for two weeks form September 14th. The reaction on the markets was muted compared to previous increases, with Oct-23 increasing by 5p per therm from its low, closing at 83p per therm. Winter-23 followed a similar path, trading down to 117.4p before closing at 123.12p.  

Power Market

GB day ahead baseload contracts fell slightly on Tuesday on the back of an unplanned outage on the East-West Interconnector between the UK and Ireland. The outage is expected to reduce UK exports, and hence demand on the system by up to 500MW. The front month contract and the rest of the curve all increased following the movements on the NBP gas market due to the impending strike in Australia. The clean spark spread for the upcoming winter fell by £1.24/MWh from £9.16/MWh last Friday to £7.92. The spark spread through the energy crisis was as high as £280/MWh, most notably in August and December 2022.  

Oil Market

Saudi Arabia and Russia announced an extension to their voluntary supply cuts of crude oil. The latest extensions will see a combined 1.3 million barrel per day reduction extending to the end of December. As a result, both Brent and WTI increased across the session adding $1.04 and $1.14, closing the trading day at $90.04 and $86.69 per barrel. Saudi Arabia announced that they will keep a watching brief on their 1 million barrel per day cut and could decrease their supply further according to the state news agency SPA. The market was caught a little unawares with cuts into October expected, but the 3-month announcement caught market analysts flat footed.  

Markets this morning

Any curve contracts that have traded thus far this morning have lost a large portion of Tuesday’s gains in early trading. Prompt markets are higher, reflecting the immediate impact of the strike action in Australia with partial stoppages due to commence tomorrow escalating to full stoppages on the 14th of September. Also pushing prompt prices higher is a short system this morning with some unplanned outages at minor UK and Norwegian gas fields. Oil has declined from yesterday’s highs as traders come to terms with the extended supply cuts.    
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