Most of the gains recorded by the NBP futures market on Thursday were reversed on Friday as market fundamentals dominated. Forecasts for mild temperatures along with higher-than-average wind generation are likely to see GB gas demand remain below the seasonal norm for much of the rest of the month. Fears that the EU may impose a full ban Russian LNG receded on Friday and left futures soften from the get-go. The near months traded down by around 5.00p per therm early in the session and held those losses for most of the day, just ticking up a little before the close. The December contract eased by 4.29p on the day and this brought the weekly loss to 4.78p. The contract for next summer settled at 117.93p, down 3.53p on Friday or 4.66p for the week. Prompt prices edged lower on Friday with the Spot and Day ahead down 2.70p and 1.55p respectively while the Balance-of-month product shed 6.00p, closing 13.72p below the front month.
It was the NBP futures market that provided the direction for the GB baseload power curve on Friday. The front month baseload contract, December, settled £4.13/MWh lower at £98.38/MWh. Further out the curve, losses were curbed by gains to carbon and the summer contract eased by £1.13/MWh to £100.50/MWh. Carbon EUAs continued to recover lost premium and the Dec-23 contract settled €1.20 up at €78.50 per tonne. Forecasts for wind generation to increase at the start of the week pressured the prompt as the Day ahead product settled £6.43 down at £93.57/MWh. Wind generation is forecast to rise above 15.0GW on Monday.
Crude oil prices notched up the third week of declines despite settling higher on Friday. Concerns of struggling demand pressured crude oil prices over the last week after disappointing economic data from China. In the absence of official government data, industry reports showed a large build in U.S. crude oil reserves for the previous week and the latest active rig count for the world’s largest oil producer was down two last week to 494 compared to 622 this time last year. The active rig count gives an indication of future production. The bounce in Friday’s prices came after Iraq declared it was committed to OPEC’s crude oil production cuts which prompted traders to cover short positions. At the close, the January contract for Brent was $1.42 a barrel higher at $81.43.
Markets this morning
GB gas demand has dropped back to 220mcm this morning as wind generation has displaced gas fired generators from the power grid. The National Grid is showing wind generation at 20.4GW which is around 54.0% of GB power demand today as storm Debi quickly passes over Ireland and the UK. While the strong winds have dented gas demand today, the conditions will make it difficult for LNG tankers to land at UK ports. The gas markets have opened softer with NBP prompt prices down around 8.00p and near futures between 3.50 and 4.50p lower in early trading. In the crude oil markets prices are flat.