Despite yesterday’s upward movement, gains were constrained

25 January 2024

Gas Market

Yesterday, European gas markets experienced an influx of risk premium, triggered by confirmation from Qatar that tension in the Red Sea is causing disruptions to LNG shipments. A total of six vessels destine for Europe, comprising of three laden and three empty, have been diverted this month. In response to this news, contracts along the NBP curve displayed pushed higher. The front month contract February saw an increase of 4.62p, closing at 71.37p, while the impact on later dated contracts was less pronounced. Gains were capped, due to robust fundamentals in the near term, as European storage levels are at 74% fullness. Additionally, alternative LNG supplies, primarily from the US, continue to arrive in Europe, ensuring a consistent supply.  

Power Market

GB baseload power contracts tracked the UK gas market, recording modest gains. The front of the curve took the brunt of the upward momentum, with baseload for February delivery closing at £69.00/MWh up £4.22/MWh. Further along the curve, gains were limited with Winter 24 edging £1.35/MWh higher to settle at £82.50/MWh. Baseload for day ahead delivery also moved into positive territory, moving £13.69 higher to close at £67.50/MWh. Strong gains in the European carbon market also supported the upward trajectory yesterday, the EUA Dec-24 contract moved €2.43 higher to close at €65.70 a tonne. Yesterday’s market took direction from strong buying activity.  

Oil Market

During Wednesday’s session, global oil markets saw an upward push, influenced by a rise in US crude withdrawals. The Strategic Petroleum Reserve recorded a  decline of 9.2 million barrels, bringing the total to 420.7 million barrels which is approximately 5% below the five-year average. Further support towards the positive momentum was China’s announcement of a substantial economic stimulus package of $278 billion. The Central Bank of China disclosed plans to cut the reserve requirement for banks, injecting $140 billion into the economy. All eyes are now focused on the European Central Bank’s meeting on Thursday, where discussions about interest rates will take place. Brent crude front month closed at $80.04 a barrel on Wednesday, up $0.49 on the day.  

Markets this morning

UK gas contracts opened lower this morning, however the losses are marginal. The front month contract Febuary-24 is down 1.23p last trading at 70.14p while Summer-24 last trading at 71.46p, a decrease of 0.81p from yesterday’s settlement. Despite the UK system opening fractionally undersupplied, price movement in the prompt market has been limited, with the Day ahead contract trading at 70.15 pence per therm. UK storage nominations are at 26MCM of injection compared to 22MCM of withdrawals yesterday. Global oil markets have continued to gain value this morning, with the Brent crude front month contract last trading at $81.15 a barrel, up $1.11 from yesterday.