NBP futures resumed their recent upward trend on Wednesday on concerns that the Israel-Hamas conflict will escalate to the wider Middle East region

23 October 2023

Gas Market

NBP futures resumed their recent upward trend on Wednesday on concerns that the Israel-Hamas conflict will escalate to the wider Middle East region after hundreds of people were killed in a blast at a Gaza hospital. Gains were capped at the front of the curve as news broke that industrial action at the Chevron operated Gorgon and Wheatstone LNG facilities was suspended, halting a second strike in as many months. Bucking recent trends, it was further along the curve that had the largest increase day on day, with Summer 24 and Winter 24 settling on average 5.48 pence per therm higher at 139.66p and 152.61p respectively. Two unplanned outages at Norway’s Aasta Hansteen and Dvalin fields supported prompt contracts with the Day-Ahead contract settling 10.00p higher at 110.05p.

Power Market

GB baseload contracts closed with modest gains on Wednesday buoyed by the strong UK gas market, however gains were capped due to the sharp decline in the UKA carbon market. Mirroring the NBP futures market, the Winter 24 contract was the biggest mover of the day, settling £3.75/MWh higher at £134.75/MWh. The baseload Day-Ahead contract settled £9.96/MWh higher day on day. UK wind generation for October so far is 10.5GW, which is 1.6GW greater than the 5-year average for October limiting gas-for-power demand.

Oil Market

Brent crude oil settled at a two-week high on Wednesday as tensions grew in the middle east after a hospital was bombed in Gaza and Iran urged for an oil embargo on Israel. The U.S. Energy Information Administration data showed a bigger than expected storage draw, with energy firms pulling 4.5 million barrels of crude from stockpiles compared to the forecasted 0.3 million barrels. Prices were also supported by data that showed that China, the world’s biggest oil importer, had faster than expected economic growth in the third quarter. Gains were capped due to fears of another interest rate hike by the end of the year in the U.S. after retail sales came in higher than expected in September. Interest rate hikes to curb inflation can slow economic growth and reduce oil demand. The front month December contract settled $1.60 a barrel higher on the day at $91.50 a barrel.

Markets this morning

NBP futures have failed to hang onto the risk premium added over the last two sessions this morning. Despite the ongoing troubles between Israel and Hamas and that Israel has shut down Tamar gas field, Israel is quite a small exporter of gas, with 9.21 bcm exported to Egypt and Jordan in 2022. The front month November contract is bearing the brunt of the downward pressure this morning, trading 9.33 pence per therm lower at 116.5p. On the prompt, the Within-Day and Day-Ahead contracts are trading 7.55p on average lower this morning. Brent crude oil has failed to hang onto its gains form Wednesday in early trading while EUA carbon has taken a further step lower.
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