A shortage in gas supplies yesterday due maintenance on various Norwegian facilities was behind the gas price increase

03 May 2024

Gas Market

NBP Gas contracts increased in value across the day, with near curve contracts opening at parity before a rally caused by a lack of supply took hold for the day. European gas markets, buoyed by falling temperatures and low Norwegian pipeline supplies as planned maintenance continued at a number of facilities, gained momentum across the day. The gap between supply and demand on the UK system widened across the day resulting in the front month contract reaching an intra-day high of 76.27p/th, before that momentum stalled and the contract settled at 75.40p/th. Despite the day-on-day gain the June contract remained 8% lower than its recent high on the 16th of April. Similarly, the Q3-24 contract reversed yesterday’s losses and closed at 77.24p/th. Despite this increase of 5.26p on Wednesday’s close, the contract was also assessed more than 7% lower than the recent peaks.  

Power Market

The GB baseload price for winter-24, supported by the large gains on the NBP gas market, increased by £3.80/MWh to close at £82.63/MWh. Also impacting on the baseload price was the increase of £0.90 per tonne in the UKA carbon credits price.  Despite yesterday’s gains, winter-24 remains 30% lower than where it was 6 months ago, with volatility likely to remain as a key characteristic of European energy prices. EUA carbon markets tracked TTF gas prices higher, as the bulls took a hold of events. The Dec-24 increased by €4.69/tonne, while Dec-25 increased by €4.93/tonne, as trading activity increased following a lacklustre day on Wednesday due to May Day closures on the continent.

Oil Market

Brent front month quickly reversed over a third of the previous day’s losses in early trading buoyed by speculation that the US would buy a substantial volume of oil to bolster its strategic reserves. However, prices soon declined back close to Wednesday’s 7-week low. The Federal Reserve had previously announced that it would keep interest rates steady and warned of stubborn inflation that could hamper economic growth. The latest jobless data for the US is due to be published on Friday, and expectations were that it would do nothing to alleviate those inflationary fears, and as a result Brent crude for July delivery fell back to $83.67/bbl at the close, a mere 23 cents above the latest 7-week lows.  

Markets this morning

Following yesterday’s short gas system, today’s expected linepack has reversed directions, with the UK system 6.5 mcm long. The prompt market has yet to post a trade, but the front month has shed 1.678p/th from last night’s close. Demand is forecast to be more subdued with temperatures expected to rise over the coming days which is feeding into the long system, rather than a recovery in supplies. On oil the front month has edged higher in early trading but remains on track to make a week-on-week loss. Inflationary data in the US continues to dampen expectation of an interest rate cut by the Federal Reserve and is weighing on crude prices.