EUA Dec-24 contact reaches its lowest level since March 2022 yesterday

13 February 2024

Markets this morning

Price movements in the UK gas market this morning is relatively limited. The front month has edged up by 1.18p to last trade at 63.83p, while the Summer-24 contract has lost 0.29p, to trade at 64.01 pence per therm. In the prompt market, contracts have yet to trade. However, the gas system is relatively balanced, with demand forecasted at 247MCM. Notably, despite the absence of maintenance, production levels in the Norwegian Continental Shelf remain below levels in December and January. In the wider fuel mix, global oil prices have opened on a higher note, with the Brent crude front month last trading at $82.58 per barrel. In contrast, the EUA carbon market has seen a decline, with the EUA Dec-24 contract last trading at €56.31 per tonne.

Gas Market

During Monday’s session, UK gas prices reached record lows, with the Summer-24 contract dropping to 64.30p, marking its lowest point since late December 2021. Contracts nearing delivery bore the brunt of the downward sentiment, with March gas shedding 3.77p to settle at 62.65p. This recent downturn mirrors the robust fundamental outlook across Europe, with gas prices striving to revert to pre-energy crisis levels. This trend is encouraging given the ongoing geopolitical tensions and war in the Middle East. Closer to home, six LNG cargoes are anticipated to arrive at UK ports before month-end, mainly sourced from the US. In the prompt market, the Day ahead and Within Day contracts settled at 63.10p and 62.75p, respectively.

Power Market

Weakness in the UK gas and carbon market filtered into GB baseload power prices on Monday, as contracts extended their step backwards. The front month contract lost £3.30/MWh to settle at £59.50/MWh while power for delivery in Summer-24 closed at £59.25/MWh, its lowest level since November 2021. Baseload for day ahead delivery also lost value, shedding £3.49/MWh to close at £64.28/MWh. The EUA carbon market was heavily hit once again on Monday, extended its four-day decline and leaving contracts at a 23-month low. The EUA spot contract closed at €55.15 a tonne while the Dec-24 contract lost €1.60 to end the session at €57.20 a tonne.

Oil Market

Four consecutive sessions of upward movement in global oil markets halted on Monday after last week’s 6% surge. Despite yesterday’s setback, Brent crude front month reaching a peak of $82.19 but settling at $82.00 per barrel. The Lunar New Year closure of Chinese markets resulted in subdued trading volumes on Monday. Eyes are now on OPEC and the International Energy Agency as they prepare to release their latest monthly reports this week. In parallel, Saudi Arabia’s energy minister disclosed a pause in oil development plans due to energy transition commitments, though this announcement failed to counteract the daily declines.

Yesterday in summary

Risk premium continued to unravel in the UK gas market on Monday, leading to the NBP Summer-24 contract closing at 64.30p, its lowest level since December 2021. Contracts across the curve continue in their push for a realignment with pre-energy crisis price levels. The recent downward trend, offers an indication into where gas prices can reach, especially considering yesterday’s record lows against the backdrop of ongoing conflicts in the Middle East. European carbon prices also reached historic lows yesterday, with the EUA Dec-24 contract shedding €1.60 to close at €57.20 per tonne, its lowest level since March 2022. The contract has dropped 25% since the beginning of the year, the weakest beginning of any year since 2016.