Natural gas prices in Europe reached a three-month high during yesterday’s session as the market reacts to potential issues rather than the current conditions. The factors which propelled yesterday’s prices included the Israel-Hamas conflict, potential labour strikes at vital LNG export facilities in Australia, and infrastructure vulnerabilities, including a suspected sabotage incident in a Baltic Sea pipeline. These various threats appear to be underscoring the market’s vulnerability, as Europe is embarking on its second winter with significantly reduced gas flows from Russia, a source that was once considered dependable. The risk premium surged from the front of the NBP gas curve, with the front month gaining 17.34p to settle at 133.96p while the front quarter, Q1-24, followed a similar trajectory, rising by 13.70p to close the day at 147.54p.
Upward pressure in the UK gas market filtered into GB baseload power futures during Thursday’s session. Aligned with the NBP market, it was the front month contract which witnessed the largest uptick in price, gaining £12.25/MWh to settle at £120.50/MWh and marking a £33.50/MWh gain over a five-day average. Longer dated contract also pushed higher, with Summer 24 moving £7.40/MWh up to close at £119.15/MWh. Further support for the power market came from the carbon markets, with both the European and UK markets seeing gains. The EUA Dec-23 contract increased by €1.54, closing at €85.33 per tonne, as the gas markets continuing to be the price driver.
Amidst the broader energy market trends, global oil prices saw a modest uptick in yesterday’s trading session. However, these gains paled in comparison to the remarkable surge witnessed in natural gas markets. The primary restraint casting a shadow over substantial price increases remains a persistent concern regarding global demand. The International Energy Agency (IEA), in its latest data release, revised its outlook for oil demand, now anticipating an increase of 880,000 barrels per day. This figure marks a noticeable downturn from the IEA’s earlier projection, which stood at a more optimistic 1 million barrels per day. The Brent crude front month settled at $86.00 per barrel yesterday, up $0.18 on the day.
Markets this morning
compared to yesterday’s session. Gas for delivery in November last traded at 137.00p, marking a 3.04p increase, while Summer 2024 last traded at 141.00p. Notably, even with seemingly stable fundamental factors, including a balanced gas system, the Within day contract has opened 7.50p higher, trading at 130.00p per therm. One LNG cargo from Trinidad and Tobago is expected to arrive at Dragon LNG terminal in the UK over the weekend. This morning Brent crude has surged $2.28 higher as the US escalate sanctions on Russian crude exports.