On Friday, UK gas prices experienced a slight increase, driven by supportive weather fundamentals. However, the gains were limited, as contracts across the curve remained in negative territory over a five-day average. The initial signs of cold weather pushed the front month contract 2.52p higher, closing at 109.65 pence per therm. Similarly, seasonal contracts for the year 2024 showed an average gain of 2.62p. Despite the uptick in demand across Europe due to the cold weather, it’s important to note that this increase is occurring from a lower starting point, as industrial demand destruction caused by the energy crisis persists. Gains in the UK prompt market was also limited on Friday, with the Day ahead and Within day contracts closing at 107.05p and 106.05p respectively.
Contracts across the front of the GB baseload power curve closed Friday’s session with a slight increase. However, a notable trend emerged over the five-day average, as significant risk premium from the front of the curve has eroded. The front month contract Jan-24 ended the session at £101.50/MWh, an increase of £0.50/MWh. However, when considering the five-day average, it has decrease £10.75/MWh. European carbon contracts rebounded during Friday’s session, taking support from an upward drive in the wider energy fuel markets. The EUA Dec-23 contract opened at €70.79 and eventually ended the session at €72.45 a tonne, up €1.90 on the day.
Global oil markets faced another decline during Friday’s session, marking six consecutive weeks of losses. The downward trend was driven by market expectations of more significant production cuts from OPEC+. The previous week’s announcement of voluntary cuts indicated internal disagreements within the cartel, creating uncertainty as the lack of published agreements on the breakdown of cuts unsettled the market. The Brent crude front month slumped to $78.88 a barrel on Friday, down $1.98 on the day. Contributing to the market pressure is the record crude production from the U.S. and non-OPEC+ members. Projections from the International Energy Agency suggest a global supply increase from a current 101.8 million barrels per day to 103.4 million barrels in 2024.
Markets this morning
This morning’s gas market has opened with a clear downward trend, as is appears to ignore the impact of cold weather and continues to realise risk premium. The front month contract Jan-24 last traded at 105.48p, down 4.17p from Friday while Summer-24 has edged 4.62p lower to last trade at 102.25 pence per therm. Despite an increase in heating demand, the UK gas system has opened 23MCM oversupplied this morning as Norwegian imports and LNG send out remain high. In the wider fuel mix, EUA carbon contracts have failed to hang onto Friday’s upward sentiment, with the Dec-23 contract which expired on Dec 13th last trading at €71.42 a tonne.