NBP futures softened on Monday as the market struggled to hang onto the premium gained in Friday’s session. A sideways pattern has developed in the market in the last week as fundamentals remain strong, with European storage levels well above their targets and gas demand remaining low, however there are still supply concerns. There have been small delays on maintenance in Norway with Kvitebjorn extended by a day until September 22 and an unplanned outage at Oseberg while Troll field is set to start production today. The front season Winter-23 took the brunt of the downward pressure on the session, settling down 4.14 pence per therm at 120.18p. On the prompt, the Within Day and Day Ahead contracts shed an average of 5.98p as wind forecasts were revised upwards.
The UK power curve declined steadily on Monday tracking the NBP gas hub and carbon markets. The October contract settled at £81.25/MWh, a fall of £4.45/MWh day on day. Strong revised wind outputs of 15.5GW were forecast for today which pressurised the Day-ahead prices which slumped by £13.65/MWh throughout the session. Both EUA and UKA carbon futures extended losses on Monday as weak auction results, softer gas prices and profit taking ahead of Wednesday’s option expiry weighed on prices. EUA spot contract settled at its lowest price since early June at €80.05 a tonne.
Brent crude continued its march towards $100 a barrel on Monday as expectations of a widening supply deficit in the fourth quarter outweighed concerns about demand. Saudi Arabia and Russia will reduce supply for the remainder of 2023 and these curbs could push the market into a 2 million barrels per day deficit in the fourth quarter. This has lead Brent and WTI to climb for three consecutive weeks to touch their highest prices since November 2022 and both are on track for their biggest quarterly increases since quarter one 2022 when Russia invaded Ukraine. Despite the recent gains, there is still concern about demand as China is a key risk because of its sluggish post-pandemic recovery, though its oil imports have remained robust. The front month November contract settled at $94.43 a barrel, up $0.50 on the session
Markets this morning
There has been limited price movement in the UK gas market early doors this morning. October is trading marginally higher at 88.55 pence per therm, a 1.03p increase from yesterday’s closing price. Further out on the curve, Winter-23 is relatively flat on the day, last exchanging hands at 120.04p. On the prompt, the Within day contract has yet to trade while the Day-ahead contract has modest gains on the session of 0.45p as the UK gas system has opened relatively balanced this morning. Brent crude November contract has breached the $95.00 per barrel in early trading as the bullish momentum continues.