The overnight blast of arctic air has sent ripples through the gas markets this morning

01 March 2024

Gas Market

Following Wednesday’s sharp increase in prices, Thursday saw over half of the gains reversed as the market took direction from the persistently strong market fundamentals. The front season, Summer-24 fell by 1.87p to 62.36p/th while the new front month contract, April, fell by 2.09p to 61.58 pence. Having reached the end of February, gas prices have fallen for a fourth consecutive month on the back of strong gas supplies and gas storage inventories at 63.1%, 1.5% higher than year ago levels. With only a month left of the traditional gas winter season, Northwest Europe has, so far, for the second consecutive year experienced a relatively mild winter, helping to suppress demand. Despite the ongoing war in Ukraine, Russian gas exports to Europe have continued to grow with February’s daily average exports of 84.9mcm, 4% higher than January and 26% higher than February 2023.

Power Market

Day ahead baseload power contracts increased day on day supported by falling temperatures and a reduction in wind generation to levels below seasonal norms. The day ahead contract was assessed at £63.25/MWh at the close, representing a day on day increase of 10%. On the near curve baseload contracts were down tracking the losses on the NBP gas market with Summer-24 shedding £1.28/MWh. Weak UKA data also contributed to losses on the far curve. Carbon markets returned to decline on Thursday tracking falling gas prices, but also influenced by an increase in selling by traders and financial institutions. Having traded as low as €50.65/tonne, recent price levels represent a 10% gain and signalled a sell for traders.

Oil Market

In its final session as the Brent front month oil for delivery in April expired at $83.62/bbl, a mere 6 cents lower than Wednesday’s close and a total loss of 5 cents over the last 5 trading days. Oil prices held firm on Thursday with US inflationary data meeting expectations. The Federals Reserve’s preferred index for monitoring the inflation rate, the Personal Consumption Expenditures (PCE) price index, rose by 0.3% in January keeping the possibility of a cut to interest rates in June high. European inflation rates are also slowing with February’s rate, to be published on Friday, expected to come in at 2.5% and on track to meet the ECB’s target of 2%.  With inflationary data from both the US and the EU slowing, the possibility of interest rate cuts on both sides of the Atlantic could help support demand for oil.

Markets this morning

The overnight blast of arctic air has sent ripples through the gas markets this morning as GB gas demand has increased to 242mcm and supplies are lagging by 20mcm. NBP futures opened firmer with April peaking at 64.68p, however, prices have reversed off early highs and it is now 1.17p per therm up on last night’s close at 62.75p. There are similar gains showing on the rest of the Q2 months and the full summer contract.  Prompt products have yet to trade this morning, but the Norwegian gas operator has reported an unplanned outage at the Troll field which could last into the weekend. May is the new front month for Brent and is trading around 30 cents a barrel higher this morning.