Increased wind generation is helping to suppress prompt gas and power prices as Storm Agnes approaches

27 September 2023

Gas Market

Gas prices shirked the upward momentum that has dominated European markets over the past week with all traded contracts falling from Monday’s close. Oct-23 as it approaches expiry opened in negative territory and never troubled the previous sessions close as the contract traded at a loss for the entire session, closing at 102.23p/th. Despite an end to strike action at the LNG facilities in Australia and the cessation of maintenance at the major Norwegian fields, prices previously strengthened despite, rather than because of, market fundamentals. What appears to have been a rally due to buying activity has dissipated and prices are returning to week ago levels. As the Winter-23 contract approaches expiry, it fell by 8.53p to close at 121.51 p per therm. with Summer-24 losing a substantial 6.44p being assessed almost at parity with Winter-23 at 121.62p per therm.

Power Market

With Storm Agnes set to make land fall over the course of Wednesday’s session, forecasts for wind generation increased across the GB system pushing the Day ahead baseload contract lower. Limiting the losses on the prompt is the ramping down at the Heysham 1 nuclear reactor for a planned outage over the weekend. Prices along the curve took direction from the step lower on the NBP with winter-23 falling by £6.38/MWh. Also impacting on power pries was a falling carbon market. EUAs for delivery in Dec-23 fell by €2.25 per tonne on the back of the weakening TTF gas markets, closing at €82.50. Dec-24 EUA’s continue to trade at a premium, with the contract closing €4.25 higher at €86.75 per tonne.

Oil Market

Global oil market consolidated their position on Tuesday with the market gaining ground following an intraday price drop to a two-week traded low, the Brent front month November contract closed the session up by 0.7% at $93.96. Traders weighed the prospect of reduced demand due to the fiscal policies of the world’s leading economies against the much-signposted reduction in supply from the OPEC+ countries. The Federal Reserve’s and ECB’s monetary policy measures are likely to last longer than previously anticipated as they reasserted their commitment to fight high inflation rates. The measures taken can have the effect of stifling economies and recuing the demand for oil. On the opposite side of the puzzle, the planned reduction in production through Q4-23 is lending support.

Markets this morning

The NBP market is continuing its slide from yesterday, with prices following a similar trajectory. Oct-23 opened lower and has yet to even trade on parity with yesterday evening’s close. Winter-23, with its final trading day tomorrow, is too posting losses in early trading, last exchanging hands at 102.48 pence per therm. In fact, all contracts that have traded thus far this morning have all opened in negative territory. Oil’s momentum from yesterday has continued this morning with the Brent November-23 contract increasing by 85 cents a barrel.
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