NBP gas prices continued their downward trend amid persistently strong market fundamentals

Gas Market

Gas prices continued their downward trend amid persistently strong market fundamentals. The front month has declined by 13% over the last 5 trading sessions from its recent peak. Prices peaked on the 25th of March following the terrorist attack in Moscow and the reported attack by Russia on a Ukrainian gas storage site. Prices have since declined amid warming temperatures, improved wind generation and the exiting of the heating season with European storage facilities over 58% full. The losses weren’t restricted to the near curve as Wwinter-24 closed below 80 pence at 79.64p/th for the first time in 14 days. Demand has been eroded to such an extent that Cheniere, the largest exporter of LNG in the US, is experiencing a significant drop in demand for LNG, with production at two of its sites cut by approximately 33% in recent days.  

Power Market

GB baseload curve contracts stepped lower once again tracking a declining NBP gas market while the far curve was also influenced by a significant decline on the UKA carbon market. Both the UKA and EUA traded market continued their decline pressured by the largest decline in carbon emissions ever recorded since the scheme began in 2005. The reduction has been largely driven by the decarbonisation of the power generation across Europe. Illustrating the decarbonisation is the trend in GB over March which saw gas fired generation produce 4.1GW less power than the 2019-2023 average. Helping to fill the gap in thermal generation has been wind which was 25% higher in March than the 2019-2023 average.  

Oil Market

Brent front month continued its seemingly unstoppable march towards $90.00/bbl on Wednesday as the contract edged ever closer to the level not seen since October 2023. Oil for delivery in June climbed to $89.35/bbl at the close, having traded as high as $89.99 earlier in the day. Oil rallied following a meeting of senior OPEC+ ministers where it was agreed that oil output policy would remain unchanged. At the meeting pressure was also applied to countries not cutting production to the required level such as Iraq, to fall in line. The confirmation of continued cuts comes at the end of a turbulent couple of days following the further attacks on Russian oil infrastructure and the Iranian consulate in Syria.  

Markets this morning

Forecast demand on the gas system is marginally higher today than yesterday, with heating and power generation demand still muted. NBP curve contracts opened higher this morning following three days of heavy losses. However, more recent trades have seen prices fall back almost in line with Wednesday’s closing price, with May-24 last exchanging hands at 63.76p/th. Movements on Brent crude are also muted this morning with the front month moving sideways, last trading at $89.36/bbl. Carbon prices are also up marginally on Wednesday’s close as the market recovers slightly following the recent declines.