Brent front month oil increased by almost 3% as geopolitical tensions and a draw on stockpiles caused concern on the markets.

Gas Market

Prices flip flopped in early trading as traders weighed up the impact of Qatari LNG being diverted away from the Suez Canal before prices stepped lower in the afternoon. The risk of delay to LNG cargos of 7 to 10 days was offset by the continued strong fundamentals that persist in European gas markets. Despite the shipping issues Qatar has not yet reduced any LNG set for Europe with January deliveries expected to be higher than December. Asian demand for spot LNG is currently bearish, which would indicate that there could be additional cargos available for European consumption. In addition, European inventories remain well stocked at record levels for this time of year, while weather driven demand is in decline which resulted in the front month falling by 2.89p to 68.48p/th.  

Power Market

Declines on the NBP gas market impacted the GB baseload near curve as summer-24 shed £1.47 closing at £63.88/MWh. Further along the curve prices declined impacted not only by the weak gas market but also a declining UKA allowance price. On the prompt, the price for Day ahead power fell by £7.00 as wind generation was expected to be up to 20% above seasonal norms. Two nuclear reactors that have been offline began their ramp up with full generation expected next week. Carbon markets returned to decline, tracking European gas markets lower. With gas prices in decline gas fired generators across Europe are higher in the merit order for dispatch than coal fired generation reducing the demand for carbon EUA’s and hence prices have declined to €61.24/tonne on the spot.  

Oil Market

Brent front month increased by almost 3% as geopolitical tensions and a draw on stockpiles caused concern on the markets. The latest Energy Information Administration report showed that US stocks had been decimated with stock declining by 9.2 million barrels in a week. The draw on stock was a result of the North Dakota oil fields closure due to the extreme cold temperatures. Adding to the upward pressure was the increase in attacks by Houthi militants on transport ships in the Red Sea. The attacks appear to have intensified over the past 48 hours despite the presence US naval vessels. Adding further bullish momentum was positive economic news from the US as the economy grew faster than expected in Q4-23 boosting future oil demand forecasts. Brent front month was assessed at the close at $82.43/bbl, while WTI jumped by $2.27 to $77.36 a barrel.