Gas prices continued to decline on Monday in the midst of improving supply fundamentals

14 May 2024

Gas Market

Following the end of maintenance imports from Norway via the Langeled pipeline increased by 37% on Monday compared with Friday. The increased supply coupled with continued weak demand kept the UK system oversupplied for the day and weighed on NBP contracts. The front month slid by 1.42p/th at the close as Jun-24 edges ever closer to the 70p/th level. Other than some far curve contracts where liquidity was thin, the majority of gas contracts moved lower across Monday. Also applying further pressure to prices, due to the reliance in Europe on LNG since the reduction in gas flows from Russia, was the continued ramp up in production at Freeport LNG. Production at the facility is now in line with levels last seen in January, indicating, in the absence of any official comment, that the facility is operating without constraint.  

Power Market

The GB baseload day ahead contract fell by £5.00/MWh despite a fall in solar generation to below seasonal normal levels. Stepping in to fill the void was an increase in wind generation to levels normally associated with this time of year. Baseload curve prices were pulled lower by declining gas and UKA markets that saw the front season shed 40 pence closing at £81.81/MWh. The EUA carbon market remains closely correlated with European gas markets as carbon declined for a second consecutive session. Adding further pressure to the allowances market was an increase in credits available due to the return to normal auction schedule, resulting in the spot declining by €1.34/tonne.  

Oil Market

Crude oil prices rebounded slightly following Friday’s losses of over a dollar a barrel with the front month closing back above $83.00/bbl. Comments from various policymakers increased the likelihood of interest rates in Europe and the UK being reduced sooner than in the US, with the Federal Reserve awaiting inflationary data that will help inform its own policy. China continues to post positive economic data that could increase domestic demand for oil in the world’s largest importer. On the supply front comments from Iraq on Sunday that it is committed to any voluntary oil production cuts that may be announced by the OPEC+ group at its next meeting in June.  

Markets this morning

Gas for heating remains muted in the UK with temperatures forecast to remain close to seasonal norms, while revised downward forecasts to wind this morning is expected to see gas for power demand increase over the coming days. As a result, gas prices have oscillated close to last nights close, with the front month trading in a tight 1.5p/th range this morning. Carbon markets are performing in a similar vain with the latest trades posted in positive territory having traded lower in early exchanges. Crude oil is flat as the market awaits the release of US inflationary data and the monthly OPEC+ report.