With temperatures set to increase to seasonal norms the selloff on the gas market continued unabated across Tuesday’s session. Q1-24 fell to 96.78p/th at closing, the first time it has been assessed below 100.00 pence per therm since the 20th
of January 2022. At its current level the contract has fallen by 71.6% in a year, and a decline of 614.84p/th or 84.3% since the peak of the market in August 2022. The gas market is currently well supplied, with European storage facilities over 93% full despite the recent cold weather while gas demand is down on the 5-year average and down on last year’s levels. The decline has not been limited to the Q1-24 contract with Summer-24 144.74p/th down on price levels 1 year ago, while winter-24 has declined by 54.4% since December 2022.
GB baseload power prices tracked the gas markets lower as the weakness on energy markets continued. Over the course of 2023 the UK has maintained a net power import position, a reflection of the improvement in French Nuclear availability, and a contrast to the net export position from April-22 to Dec-22. Also improving the security of supply for GB is the new Viking interconnector between GB and Denmark which is scheduled to become operational on the 28th of December. The EUA carbon market declined further on Tuesday being taking direction from the weak TTF gas market. The Dec-23 contract hit a new 13-month low while the spot market, at €68.84/tonne was assessed at its lowest point since October 2022.
A choppy session on the oil markets eventually saw prices decrease by 83 cents on the day, the first time since May that the market posted four consecutive days of losses. The market was still not convinced of OPEC+’s commitment to the further reduction in production into 2024. To try to reaffirm their stance the Russian Deputy Prime Minister issued a statement confirming their commitment to the cuts, and that they could implement further measures to eliminate “speculation and volatility”. The reaction was for the front month Brent crude to trade above $78.00 a barrel, only for weak economic data from the U.S. to dampen expectations for oil demand. In what was eventually a new five month low the front month Brent crude contract was assessed at $77.20/barrel at the close of trading.
Markets this morning
NBP gas futures have rebounded following two sessions of heavy losses with buying activity increasing on near term contracts following the breaching of the 100.00p/therm mark. Gas prices on the prompt are elevated with temperatures higher than the past week, but still marginally below seasonal norms, while wind generation is still increasing. Carbon markets too have rebounded following the breaching of the €70.00/tonne support level. While oil investors remain unconvinced of the OPEC+ supply cuts, and Chinese economic data is weighing on the demand outlook for the World’s second largest consumer of oil.