Oil prices initially traded higher by 74 cents a barrel following Israel’s comments of retaliation, but much of the premium has since fallen out

16 April 2024

Gas Market

Gas prices opened strongly following the attack by Iran on Israel over the weekend, while contributing to the early bullishness was news that the Nyhamna gas processing plant experienced an unplanned outage removing over 50mcm from the supply picture. As a result, the front month opened up at 79.00p/th before risk quickly fell out of the market as it became clear there was sufficient gas to meet the demand and the expectation Nyhamna would return on Tuesday. Prices oscillated for much of the day, before upward momentum returned to the market in late afternoon as it became less clear if the processing plant would resume operations on Tuesday morning. Norwegian gas operator Gassco stated that they would update the market as and when they have any information. As a result of the late rally prices along the curve closed higher day on day, with May up 1.12p/th at the close.

Power Market

  Despite the increasing NBP price GB baseload mostly declined. Near curve prices did take direction from the strong gas market with May and June increasing by an average of 0.5p/th. However, from July onwards baseload prices declined, pressured by a declining UKA allowance market. The Dec-24 contract fell by 5% which helped baseload prices to ease lower. On the prompt day ahead baseload power continues to trade at a significant discount to month ahead. Prices for power delivered today were assessed 42% lower than the May-24 contract. EUA contracts declined over the course of the day having opened higher as a result of the tensions in the middle east following Iran’s attack. The Dec-24 contract declined by 2.1% day on day, with auction results in Germany helping to suppress the market.  

Oil Market

Crude oil prices slipped from Friday’s close despite the attack by Iran on Israel, the first attack by another country on Israel in more than thirty years. In early trading oil prices initially opened higher with the front month trading above $91.00/bbl. However, the market weighed the comments emanating from Iran over the weekend, stating that it considers its retaliation to be over following the launching of 300 missiles and drones that were in response to the destruction of its consulate in Damascus. These comments coupled with the fact the expected attack head already been priced in to oil contracts last week helped prices ease lower over the rest of the day only for late comments from Israel to stimulate the market and reverse much of the day’s losses the front month contract slipped by 35 cents to $90.10/bbl.  

Markets this morning

Oil prices initially traded higher by 74 cents a barrel following Israel’s comments of retaliation yesterday evening, but much of the premium has since fallen out, to the extent that oil is now trading at a discount to last night’s close. The NBP gas market has reacted strongly to the news that the outage at Nyhamna has been extended by another day at least. As a result the front month contract traded as high as 82.88p/th but is retreating at present, with the last trade at 81.32p/th. The minimal movement on oil, in contrast to the gains on the NBP seems to indicate that the Nyhamna supply issue is the main driving force rather than the Middle East conflict.