UK gas prices continued their downward trend for the sixth consecutive session

Gas Market

During Wednesday’s session, UK gas prices continued their downward trend for the sixth consecutive session, reinforcing the prevailing trend of decline. The Summer-24 contract initially dropped to a low of 61.45p before rebounding slightly in the afternoon to eventually settle at 62.19p, a 1.10p discount compared to the previous session. Meanwhile, the front month contract March edged closer to the 60.00p threshold, closing at 61.07 pence. As Europe progresses through the winter gas season, storage levels remain at 66% capacity, notably higher than the ten-year seasonal average of 49%. This surplus in storage, coupled with weak demand and robust LNG imports, is expected to sustain downward pressure on the gas market. However the market remains exposed to volatility. In the prompt market, the Day ahead contract breached the 60.00p price barrier, closing at 59.60p, marking its lowest level since last May.  

Power Market

Losses in the UK gas market filtered into the GB baseload power futures market on Wednesday, as contracts across the curve settled lower. The front seasonal contract Summer-24 closed at £57.75/MWh its lowest level this year while Winter-24 lost £1.43/MWh to close at £70.83/MWh a price not witnessed since 2021. Baseload for day ahead delivery closed at £63.01/MWh while trading at an average of £61.29/MWh so far in 2024. The EUA Dec-24 contract rallied on Wednesday morning to peak at €57.54 but the upward momentum wasn’t sustained, and the contract closed at €56.44 a tonne, marking a five-day losing streak. The EUA Spot contract ended yesterday’s session at €54.65 a tonne.

Oil Market

On Wednesday, global oil markets experienced volatility. The Brent crude front month initially climbed higher, reaching $83.53, but eventually closed $1.17 lower session on session at $81.60. The early hours of trading saw positive momentum driven by OPEC’s robust growth demand forecast. According to OPEC’s monthly report, world oil demand is anticipated to rise by 2.25 million bpd in 2024 and by 1.85 million bpd in 2025, reinforcing market optimism. However, later in the afternoon, it became evident that US crude stockpiles had surged while US oil demand dipped. As a result, the West Texas Intermediate contract for March lost $1.23, settling at $76.64 a barrel.

Markets this morning

UK gas prices have opened higher this morning; however, the price movement is minimal as key market fundamentals are unchanged. The NBP front month contract last traded at 61.76 pence per therm, a 0.69 gain from yesterday’s close while Summer-24 contract is trading at 63.61p. In the prompt market gains have also been recorded despite an oversupplied gas system. The Within day and Day ahead contract are trading at 62.00p and 60.75p respectively. Three LNG cargoes are forecast to arrive into UK ports this weekend, while The Netherlands and Belgium are forecast to receive a similar number. Limited price movement has been recorded in the EUA carbon market this morning, as the Dec-24 contract last traded at €56.66 a tonne.  

Yesterday in Summary

The prevailing downward trend in the UK gas market continued yesterday, as contracts across the curve recorded a sixth consecutive session of losses. The front seasonal contract Summer-24 dipped to a low of 61.45p before crawling back to close at 62.19p, its lowest level since January 2022. As Europe approaches the latter stages of the winter gas season, storage levels are at 66% capacity, and are forecast to surpass the ten-year seasonal average of 49% by the end of winter. The surplus gas in storage, along with sluggish demand and strong LNG imports, is expected to keep pressure on the gas market for the near term. The EUA carbon market took another step backwards yesterday, with the EUA Dec-24 contract closing at €56.44 a tonne.