Following the expiry of four contracts on Thursday, Oct-23, Q4-23, Winter-23 and the Gas Year 23 Friday’s session was rather subdued but nevertheless near curve prices crept lower. The new front month Nov-23 opened the session in negative territory and gradually fell across the day eventually closing at 105.45p/th a decline of 4.36p from Thursday’s close. The new front quarter and season both seemed to be following a similar path before a mini-revival just before the close saw the Q1-24 and Summer-24 closing at 125.77p/th and 117.63p/th respectively. Globally all eyes are now firmly fixed on China and how its economy handles the fall out of the potential Evergrande collapse. Evergrande are the developer behind millions of proposed homes in China and its collapse could have a detrimental impact on China’s economy and its demand for energy. Housing currently accounts for approximately 25% of China’s economy.
The Winter-23 baseload power contract expired on Friday, post losses on its final session. The malaise from the NBP market made it way to the near curve baseload contracts, with winter falling by £3.90 to expire at £104.00/MWh. Further along the curve contracts took direction from a strong UK carbon allowance market. Seasonal contract in 2024 and 2025 made minor day on day gains as the UKA market gained almost 3% across the day. GB Baseload Day-ahead continued its recovery from Thursday. The increase in prices continued into Friday as the contract stepped higher to £94.00/MWh with wind generated power returning to normal following the first storm of the season last week.
The front month oil contract was markedly stagnant on Friday as the recent price rally stalled. The Brent crude front month November-23 closed the day relatively flat to Thursday at $95.31 a barrel. Friday marked the November contracts final day of trading, with the new front month as of today, December-23 contract more liquid as prices fell to $92.20 a fall of 90 cents. Despite Friday’s fall prices finished Q3-23 almost 30% higher than the end of Q2-23 as the supply crunch impacted the market. However, traders are wary of falling demand spurned on by faltering economies due to the prolonged period of high interest rates as inflation continues at major economies above central bank targets. China, the largest importer of oil, has long since failed to recover post covid, and the developments at Evergrande as its founder in investigated by police could further dampen an already struggling economy.
Markets this morning
The gas market’s weakness has continued following the weekend as we enter the first trading day in the gas winter season. November-23 opened in strong territory, trading at its high, before sliding by almost 4p to the last trade of 103.95p per therm. Flows for Norway have increased this morning compared to last week as maintenance on the Norwegian gas system eases. The increased flows have helped push prompt contracts lower, with indicative bid and offers indicating the next trade will be even lower than the last traded prices. On oil markets, the new front month Brent contract, December-23 has essentially moved sideways in early trading this morning, with prices up by a mere 21 cents from Friday’s close.