A sense of market stability was welcomed on Friday.

06 November 2023

Gas Market

In contrast to the prior session, UK gas prices began Friday on a positive note. Nevertheless, as the day progressed, prices experienced a gradual decline, ultimately ending the volatile week in negative territory. Throughout the day contracts stayed within a narrow price range, typically moving by just 2.00p. Taking a closer look at the five-day price movements across the NBP curve reveals that significant risk premium has eroded from near delivery contracts. As the NBP front month contract averaged a decline of 15.18p, while the Summer 2024 contract showed an average drop of 10.85p. On Friday, gas for delivery for Summer-24 closed at 122.59p, a 39.83p premium over the out turned price for Summer-23, which stood at 82.76p per therm. In the UK prompt market, gas contracts saw a small uptick, driven by unplanned outages at Kollsnes processing plant and Troll gas field in Norway.

Power Market

Aligned with the UK gas market trends, the GB baseload power future contract experienced a slight dip on Friday. Specifically, the front month, December 2023, closing at £100.15/MWh, a decrease of £1.47/MWh on the day. Despite this marginal decline, it’s worth noting that ample risk premium has fallen out of the market when examining the five-day average, with Summer 2024 futures down by an average of £10.40/MWh. One key contributor to weakness in the prompt market is the continued strength of wind generation throughout the UK, surpassing seasonal averages by approximately 20%. As a result, the GB baseload power for day-ahead delivery maintained a lower price, closing at £79.29/MWh on Friday.

Oil Market

Global oil markets experienced an initial uptick at the opening of Friday’s trading session, but this upward momentum was unable to sustain itself. As a result, the Brent crude front-month contract closed $1.96 below from the previous session at $84.89 per barrel. The decline was attributed to the easing of supply concerns on the back of tensions in the Middle East. Additionally, unfavourable macroeconomic data from the United States including weak job growth further contributed to the downward pressure on oil prices on Friday. Brent Crude front month has traded at an average of $85.46 in November.

Markets this morning

UK gas prices have started the day in negative territory, with the front month contract December-23 moving 4.51p lower to last trade at 118.04p while the front quarter, Q1-24 last traded 4.63p lower at 126.50p. With no major changes to the fundamental picture, it appears the market continues to release risk premium and align with ample near-term supplies.  Nonetheless, the market remains exposed to volatility. The UK gas system has opened oversupplied, which is supported 18MCM of storage injection. In the wider energy markets, Brent crude has opened higher, last trading at $86.13 per barrel, an increase of $1.24 from Friday’s settlement.
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