Storage across Europe is over 96% full

04 October 2023

Gas Market

The recent downward momentum showed no sign of slowing through Tuesday’s session as the entire curve continued to lose value. Gas for delivery in November led the charge with prices down 6.13p. At 92.23 pence per therm, November has not reached these lows since 2021. The malaise from the front month spread to Q1-24, with the contract at 116.75p, a fall of 21.61p over the last 20 days of trading, with 14.82p of that constrained to the last 5 days. It appears as if the reality of the market fundamentals has finally hit home. Storage across Europe is over 96% full, a plethora of LNG is expected in the UK over the coming weeks, and despite some continued maintenance Norwegian supplies are healthy at present. Demand looks set to remain suppressed over October and early November with temperatures expected to be higher than seasonal norms across Europe.

Power Market

GB baseload contracts followed the NBP market lower across Tuesday’s session. With gas a key driver of power prices the move was hardly unexpected as prices fell due the recognition of the strong gas fundamentals. On the far curve prices took direction from a strong UKA carbon market. UKAs have rebounded from historically low prices in September with prices experiencing upward momentum since. Wind generation continues to be strong on the GB system, while the increased temperatures are suppressing demand not only on gas but also on the power markets. As a result, Day-ahead baseload prices continue at their low levels with prices 30% lower week on week.

Oil Market

The Brent crude front month rebounded from a three-week low to increase by 21 cents day on day to close at $90.92 a barrel on Tuesday. Intraday the gains were greater as oil increased despite the dollar reaching a 10-month high against a basket of other major peer currencies. Factors behind the increase in the dollar include the US government avoiding a partial shutdown and the latest economic data emanating from the US indicating the Federal Reserve will likely keep interest rates high, or possibly increase them further. A strong dollar typically means falling oil prices but with the OPEC+ group meeting on Wednesday, expectations are for the producer group to keep production at current relatively low levels which has contributed to push oil markets higher.

Markets this morning

Following the drastic sell off on the gas market over the past two sessions, traders are quite sheepish this morning. Markets are quiet with only the November, December and January contract trading thus far. Initial prices for all three show a rebound from yesterday’s close. The current bids and offers for Q1-24 and Summer-24, though the contracts are yet to trade, indicate they too will open in positive territory. Prompt markets too are quiet at this early stage with no trades, or even bids or offers, at the time of writing. Brent Crude has traded lower this morning with prices down 55 cents at $90.37 a barrel.
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