The gas markets opened firmer after the long weekend as tensions in the Middle East increased

Gas Market

The gas markets opened firmer after the long weekend as tensions in the Middle East increased with Israel rejecting the current proposal for a ceasefire while Hamas were looking to accept the deal.  In fact, Israel continued its assault on the border city of Rafah yesterday morning which likely caused the June contract to open at 77.51p per therm before rising to the peak of 78.36p.  The strong opening gains were pared back as June almost got back to parity with Friday’s close by mid-morning but near contracts remained volatile to the conclusion of the session. At the close, June was marked 1.39p higher, which was above the average gain for the remaining summer months.  Prompt prices were also elevated at the end of the play, with support arriving from a short system and forecasts for low wind generation while just one LNG cargo is expected at UK ports over the next week.

Power Market

Increased temperatures and forecasts for solar photovoltaic generation at over 20% of the seasonal norm is expected to limit the fall in wind generation for the rest of the week. The extra renewables curbed gains to the Day ahead product for GB baseload yesterday as the contract settled at £75.90/MWh. The Day ahead is averaging £70.34/MWh this month which is 29.6% above the average price for April. GB baseload futures were marked higher at the close in response to gains on the NBP curve yesterday. The front month settled at £66.75/MWh posting a gain of £1.50/MWh, the Winter-2024 product was assessed £1.70/MWh up at £82.70/MWh.  

Oil Market

The advancement of Israeli troops into the city of Rafah after rejecting the latest truce proposal created some volatility in the crude oil markets yesterday.  Prices rallied early in the session but failed to maintain the ascent after sentiment switched to the woes in the U.S. economy and looked to the weeks inventory report to be released on Wednesday.  Initial data from the American Petroleum Institute suggests a minor build in U.S. crude oil reserves last week which if confirmed will be bearish for prices.  The market is expecting a draw on stocks with the commencement of the U.S. summer driving season.  At the close, Brent was 17 cents lower at $83.16 a barrel.  

Markets this morning

Prompt prices are under pressure this morning as demand is forecast down at 151mcm and supplies are 13mcm long. The prompt led losses have fed into the front months of the NBP curve with June 1.50p lower at 74.35p per therm. A little further out, the Winter-2024 contract is just over a penny down at 92.85p while longer contracts are edging lower too. Carbon EUAs have softened but losses are modest so far with the Dec-24 contract last trading at €70.95 per tonne. In the crude oil markets, Brent has slipped to $81.88 a barrel in anticipation of the E.I.A. confirming a build in U.S. crude oil reserves later today.