Gas and oil prices rebounded following the Yemen Houthi militants vowing to continue to attack tankers

21 December 2023

Gas Market

Gas prices rebounded on Wednesday, following Tuesday’s losses. Prices across the board opened in positive territory and remained above the previous close for much of the day. The risk posed by the attacks in the Red Sea raised its head again as a potential driving force behind the 2.85p/th increase to the front month Jan-24 contract. The Iran linked Yemen Houthi militant group vowed to continue to attack tankers in the Red Sea despite the US led task force. Traders and analysts continued to speculate whether LNG cargos would be rerouted, but as of Wednesday’s close there were no confirmations of any impact to LNG, with 6 cargos still expected in the UK by Christmas day. Price increases could also have been driven by buying activity ahead of the Christmas holiday period, as traders look to close any open positions.

Power Market

GB baseload contracts increased inline with the NBP gas market. Summer-24 added £2.65 per MWh to close at £78.50/MWh. On the day ahead markets power prices continued to decline. Wind generation on the GB system is forecast to be 20% above seasonal norm levels helping to supress prices. The 640MW Torness nuclear reactor also returned from a planned outage helping to reduce gas for power demand and add to the low day ahead price of £47.50/MWh, with power for the festive period prices at £26.50/MWh. The holiday break in auctions on the EUA carbo9n market is lending support to prices with the Dec-24 contract increasing by €3.43 per tonne across Wednesday.

Oil Market

Oil prices hovered close to the €80 a barrel level for much of Wednesday’s session as the market remained wary of issues in the Red Sea, with Brent front month eventually closing at $79.70 a barrel. Despite the US led operation to help secure shipping routes, the Yemen Houthi militants vowed to continue to attack oil tankers. As a result, some maritime carriers chose to reroute their ships around the Cape of good hope, adding significant delays to scheduled deliveries. Helping to keep a lid on prices has been an unexpected crude inventory build, larger than anticipated fuels stock increase and record domestic production in the US, a report from the Energy Information Administration showed. Globally, economic green shoots may be on the horizon with inflation slowing dramatically across the EU and UK.

Markets this morning

UK gas prices have opened strongly again with an early morning high of 88.41p/th for the front month contract but has been easing off over the last hour last trading at 86.49p/th. It is a similar situation across the curve with prices all adding between 2.00 – 3.50 pence per therm. Oil prices have recovered from an early dip due to concerns regarding US inventory levels and the Brent front month is now trading at $79.95 per barrel, a modest increase of 25 cents from last night’s close. Mirroring the wider energy complex, and the being driven by a lack of Auctions EUA carbon market too are continuing their upward trajectory.
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