For the second consecutive session UK gas contracts ended the day in negative territory on Friday. Risk premium eroded from the front of the curve as a result of favorable market fundamentals including aggregate European storage levels at 89% fullness. The NBP month ahead contract closed 4.25p lower at 82.55 pence per therm, down 14.55p over a five-day average. The Summer 24 contract closed at 82.23p on Friday, its lowest level since mid-February 2022 and an 81% discount to its peak of 455.39 on August 26 2022. Ample LNG cargoes continue to arrive into Europe, with seven forecast to arrive into the UK before month end. Price movement in the prompt market was aligned with the futures market, as the Day Ahead contract closed 9.45p lower to settle at 73.50 pence per therm.
GB baseload power contracts, tracked the downward sentiment in the UK gas market on Friday, however losses were limited. Baseload power for January delivery closed at £79.50/MWh, down £11.25/MWh over a five-day average while Summer 24 shed £2.30/MWh on the day to settle at £75.70/MWh its lowest level since January 2022. Baseload for day ahead delivery closed £12.62/MWh lower at £66.37/MWh on Friday. EUA carbon contracts pushed higher during the early hours of trading on Friday, however the market gave up the majority of their early gains to close fractionally higher. The EUA Dec-24 contract closed at €70.10 a tonne, up €0.37 on the day.
Limited price movement in global oil markets on Friday, with the Brent crude front month closing at $76.55, down $0.06 on the day. The commodity opened higher, however the upward momentum was short lived following comments by the U.S. Federal Reserve that interest rate cuts are not going to be implemented as fast as the market expected. In addition, negative U.S manufacturing data showed a decline for the third consecutive month on Friday, which is a clear indicator that oil demand may decline as we progress into the new year. Brent crude front month has traded at an average of $75.91 a barrel to date in December, a $6.12 decline compared to November.
Markets this morning
The UK gas market has experienced minimal price movement this morning, with traded contracts unable to surpass a 1.00p movement. The NBP January-23 contract last traded at 83.11p, up 0.56p from Friday while Q1-24 last traded at 84.17 pence per therm. The UK gas system has opened oversupplied, as demand remains weak at 253MCM. Strong supplies and mild weather conditions appear to be driving the market lower in the near term. Global oil markets have opened in negative territory this morning, with the Brent crude front month last trading at $75.87 a barrel, down $0.68 from Friday’s close.