NBP prompt market surged this morning

09 October 2023

Gas Market

As the week drew to a close amid considerable volatility, UK gas prices managed to secure a positive position on Friday, albeit with gains that were somewhat constrained and unable to fully offset earlier losses. Initially, market sentiment appeared bearish, with the front month contract opening at 88.75p. However, this trajectory swiftly reversed, and the contract closed at 94.49p, marking a 4.62p increase. Furthermore, recent data unveils a 50% surge in trading volumes within European gas markets compared to the previous year, highlighting the region’s robust trading activity. In contrast, Asian LNG markets have experienced a 7% uptick in trading volume. This substantial increase in European market activity reinforces its standing as the preferred destination for global traders seeking exposure to market volatility. Six LNG cargoes are expected to arrive into UK ports in the coming week. An unplanned outage at Kvitebjorn plant in Norway support a strong bounce in the prompt market.

Power Market

GB baseload power contracts tracked the upward movement in the gas market on Friday. Despite the modest uptick in prices, contracts have failed to regain the losses recorded earlier in the week. The front month contract November pushed £3.25/MWh higher to close at £90.25/MWh. Further along the curve gains were less pronounced, as the Summer 24 contract moved £1.25/MWh to close at £98.75/MWh. The disconnect between UK carbon and European carbon prices continued on Friday, as the UKA Dec-23 contract increased by almost 5% while the European equivalent failed to break half a percentage point.

Oil Market

In a week that commenced with Brent crude oil trading at $90, the week concluded with the price hovering just below the $84 mark, underscoring the volatility that presently characterizes the global oil market. It was the largest weekly loss for the commodity since March. This uncertain landscape is primarily driven by a confluence of factors, including persistent concerns surrounding demand dynamics and the unsettling backdrop of gloomy macroeconomic data. In particular, concerns loom over US government expenditure, as evidenced by a 17-year low in US Treasury prices, a trend that has unsettled bond investors. Brent crude front month has traded at $87.22 a barrel on average so far in October, a $5.22 discount to the September average.

Markets this morning

UK gas prices have started the day with a noticeable upward trend, with gains seen in the front month contract, which last traded at 102.00p, an increase of 7.51p from Friday. Similarly, the Summer 24 contract is up by 3.62p, currently at 114.30 pence. However, it’s the prompt market that’s drawing significant attention, particularly the Within Day contract, which has surged by 25.95p to reach 101.00p. This surge is driven by the fact that the UK gas system finds itself 32MCM undersupplied this morning. Brent crude oil has gained $2.32 this morning to last trade at $86.90, This upturn is primarily influenced by heightened geopolitical tensions in the Middle East, stemming from the conflict between Israel and Palestine.
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