European storage levels at 93% fullness

28 September 2023

Gas Market

In the UK gas market, prices experienced a second consecutive session of declines yesterday, although these losses were marginal. As we approach the final day of trading, the Winter 23 contract settled at 120.00p, a significant contrast to its peak of 722.96p in August of the previous year. Instead, it now aligns more with its yearly low of 105.42p recorded on June 1st.  European gas storage levels currently stand at a reassuring 93% fullness, and with the prospect of a mild winter ahead, Europe could emerge from the season in a robust position, in stark contrast to the market turmoil experienced last year. Limited price movement was recorded in the prompt market yesterday, with the Day ahead and Within day contract settling at 99.05p and 99.50p respectively. The UK prompt market continues to closely mirror the movements of the Dutch TTF.

Power Market

Aligned with the trends in the UK gas market, GB power prices experienced a small decline during yesterday’s trading session. The front-month contract October settled £0.95/MWh lower at £87.20/MWh, while the Winter-23 contract closed at £108.10/MWh, marking its lowest price point in 2023. This decline in prices was also driven by weak European carbon prices., with the EUA Dec-23 contract closing at €82.00 per tonne. GB baseload power for day-ahead delivery faced significant downward pressure yesterday, with the contract closing at £67.65/MWh. A key contributing factor to the  losses was the overperformance of wind generation in the fuel mix.

Oil Market

On Wednesday, global oil prices surged as the market reacted to the ongoing strain on global supplies, which has been exacerbated by the production cuts enforced by OPEC+. Brent crude front month peaked at $96.55 a barrel, a $2.59 gain day on day. The present price premium at the front end of the curve, standing at $2.00 per barrel, closely tracks the joint 1.3 million barrels per day production cut by Saudi Arabia and Russia until the conclusion of 2023. The front month contract has traded at an average of $92.06 a barrel in September, a $9.69 premium to the year-to-date average price. In infrastructure news, the British government has approved a new oil project situated to the west of the Shetland Islands. However, the oil field is relatively modest in the global context, boasting a projected yield of just 300 million barrels of oil over its operational lifetime.

Markets this morning

This morning, UK gas prices continue to display limited price movement, with the front month October currently trading at 101.50p, marking a 2.09p increase from the previous day. Also in its final trading session, the front quarter Q4-23 is mirroring this trend, showing a 2.22p uptick and currently standing at 112.80 pence per therm. UK gas storage injections are forecast at 18MCM which reflects how the gas system is currently well supplied. Brent crude remains on an upward trajectory, currently trading at $96.65 per barrel, underpinned by supply concerns that are expected to drive prices higher.
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