Monday revealed a clear downward sentiment in the UK gas market, with prices dropping to levels unseen since early 2022. The front seasonal contract Summer-24 closed at 90.02p, marking its lowest point since February 2022. Additionally, the gap between the front two quarterly contracts continued to narrow, as Q1-24 and Q2-24 closed at 90.96p and 90.03p, respectively. Adding to the positive outlook, reports indicating the tightening of restrictions on vessels navigating through the Panama Canal due to drought conditions in January 2024. This development holds the potential to increase LNG exports to Europe. In the prompt market contracts followed a similar trend, with the Day ahead contract closing 6.60p lower at 87.50 pence per therm.
Aligning closely with the UK gas market trends, GB baseload power futures have recently plummeted to levels not seen since before the energy crises. The front of the curve has taken the brunt of the downward pressure, as the front month contract closed £6.75/MWh lower, settling at £84.00/MWh. This decline is mirrored in the 2024 seasonal contracts also, with Summer 24 closing at £79.75/MWh, a price not seen since January 2022. Persistent weaknesses in the wider energy fuel mix continued to pressure European carbon contracts. The EUA spot contract, reached a 14-month low, closing at €67.31 per tonne. The Dec-24 contract slipped below the €70 price mark before experiencing a slight recovery, closing at €73.11 per tonne.
Brent crude reached a high of $76.50 on Monday’s, marking a continuation of its positive momentum from the previous day. The Brent crude front eventually closed at $76.03, up $0.19 a barrel on the day. Recent downward price movement has been influenced by renewed concerns surrounding demand and the uncertainties of OPEC+ production cuts. In addition, the latest consumer data from China has added to the markets unease. As the world’s second-largest oil importer, China’s economic indicators carry significant weight in the global oil landscape. In November, China experienced a 0.5% year-on-year decline in consumer demand, raising red flags within the market. China’s oil imports shrunk by over 9% year on year in November.
Markets this morning
Once again, UK gas contracts have opened lower, however this morning’s losses are limited in comparison to yesterday’s downward sentiment. The front month contract last traded at 88.61p, down 1.57p while Summer-24 is trading 0.72p lower at 89.30 pence per therm. Gas demand forecast for the UK stands at 269MCM, leaving the system marginally undersupplied. As of now, prompt contracts are yet to trade. Limited price movement has also been recorded in the wider energy mix this morning, with Brent crude last trading at $76.24 a barrel while the EUA Dec-23 contract is sideways at €67.30 a tonne.