The return to production of the Freeport LNG export facility weighed on gas prices

Gas Market

In its final session before expiry, the May-24 contract fell by over three pence per therm. Gas prices declined with pressure coming from increased gas flows in the US to LNG liquefaction plants. Freeport LNG was pulling in additional gas as the plant began its return from maintenance with the total volume of gas feeding into US LNG export plants increasing by 5% to a three-week high. The expected increase in global supply of LNG helped the May-24 contract decline by 3.02p/th having traded as low as 68.49p/th. Winter-24 was also in decline as prices tumbled across Monday’s session, as the front season fell by 2.75p/th at the close, while gas for 2025 lost further ground with the contract shedding over 3.50p/th over the last two sessions. The Day ahead contract shed 5.00 pence per therm as it was pressured by gas demand falling by over 25% from Friday’s session.

Power Market

GB Baseload power prices fell on Monday, pressured by weak gas and UKA carbon markets. The front month NBP gas contract’s 3% decline fed directly into near curve baseload power contracts, while a decline of over 2% for the Dec-24 UKA contract helped push far curve prices lower. An increase in wind generation to above seasonal norm levels saw the continued decline on the Day ahead contract.  The contract has out turned at £54.27 for the month versus April’s expiry of £59.27/MWh illustrating the impact of renewables. On EUA carbon markets, the Dec-24 contract fell in line with the declining energy markets. Warmer weather and an increase in renewable generation is reducing the demand for gas consumption and the resulting carbon offsets.

Oil Market

 A cautiously optimistic outlook for a 40-day ceasefire in the Israel Hamas conflict helped oil prices to decline in trading on Monday. Oil prices declined following quotes from a senior Hamas official stating that the group had “no major issues” with the proposed terms for the ceasefire. Brent oil for delivery in June fell by $1.10/bbl to $88.40 having threatened to return to levels above $90 a barrel late last week. Also feeding into the contracts decline was the view from the markets that the US was unlikely to reduce interest rates in the near future. Following poor inflationary data from the US for the month of March, the risk of interest rates actually being increased is growing and could impact future demand for oil.  

Markets this morning

Gas prices have reversed all of yesterday’s losses at this early stage of trading. Reports that the Houthi militants have expanded their area of attack to the Indian Ocean to hamper Israeli linked ships from using shipping routes that circumnavigate the Cape of Good Hope is increasing the risk that LNG tankers could be impacted. Oil prices have remained rangebound following Monday’s losses with hopes of the ceasefire being accepted by Hamas’ leaders weighing on oil contracts. Tracking the rise on European gas markets the EUA Dec-24 contract have increased by €1.80/tonne to €67.29/tonne.