Forecasts for cooler temperatures and less wind generation from the weekend provided a boost to NBP prompt and near month contracts

21 November 2023

Gas Market

The UK gas markets opened firmer on Monday with near months showing strong gains from the get-go as temperatures are forecast to fall from the weekend.  The front months were up by over six pence per therm with the December contract peaking at 120.08p.  Support faded over the session and the near curve eased back off the highs, and at one stage looked as though they could turn negative but stopped just short, however, the Summer-24 contract did drop to 115.15p briefly.  December eventually settled with a modest increase of 2.53p, closing at 116.27p to post its first gain in over a week.  Yesterday’s intra-day swing in prices is evidence the market is overly sensitive to influences that it might previously take in its stride given the current fundamentals.

Power Market

The slow decline in near GB baseload futures over the last week was arrested on Monday as the market reacted to forecasts for lower temperatures and less wind generation.  The front month recorded the largest gain of the day settling £2.85/MWh higher at £99.35/MWh while contracts out to next summer closed with an average gain of £0.65/MWh. Wind generation is expected to drop below the seasonal norm from the weekend but remained at over 10.0GW on Monday. Support for the prompt came from the NBP prompt on the day and baseload for the day ahead settled at £106.77/MWh which is £24.12/MWh above the index for the month to date.

Oil Market

Crude oil prices continued to recover on Monday following hints that OPEC+ are to consider deeper cuts to the group’s production output or at least extend the current cuts into Quarter 1-2024. The group is due to discuss the options at the weekend and expected to release a statement following the meeting on Sunday.  There are questions as to how much more Saudi Arabia can limit it’s output given current production is just above the levels witnessed during Covid-19 where output dropped to 8.5m barrels per day.  There are also questions regarding whether the rest of the group have the appetite to restrict production further as they could possibly yield some of their market share. At the close, the January contract for Brent was $1.71 up at $82.32 a barrel.

Markets this morning

The NBP futures market is trending lower this morning with near months down off earlier highs.  December opened at 120.00p per therm but is down to 115.19p on its latest trade.  The Summer is also around a penny below last night’s settlement albeit trading on this contract has been limited. Prompt prices are also edging lower with the Day ahead down a half a penny leaving the contract retaining most of yesterday’s gains. Losses are curbed due to the GB gas system being forecast 13mcm short this morning.  Crude oil prices have switched direction with Brent for January delivery down 48 cents to $81.84 a barrel. Find out more about our Commercial Energy Services.