Weak fundamentals drove NBP prompt and curve prices down on Wednesday

04 July 2024

Gas Market

The NBP gas market moved back into negative territory on Wednesday. A flurry of weak fundamentals made up of higher wind-for-power generation and steady supply from Norway due to the return of several fields and terminals from maintenance played into the bear’s favour. The GB system finished the day in a long position, with renewables making up just over 50% of the power stack alleviating demand for gas levels. The August-24 contract appears to be more comfortable below the 80p per therm level than its front month predecessor, closing the day at 75.97p per therm, a loss of 2.76p day on day. The losses were even more pronounced on the prompt with the Within day contract shedding 3.60p per therm day on day to settle at 75.90p, while the Day ahead finished slightly lower at 75.85p per therm.

Power Market

  Forecasts for lower solar power production as well as an unplanned outage at a 710MW gas-fired power plant and 620 MW nuclear facility did little to provide support to prompt and curve GB Baseload contracts on Wednesday, with prices tracking the direction seen on both the NBP and UKA carbon markets instead.  The front month August contract shed £2.00 to settle at $68.50/MWh. Further along the curve the losses were more muted, with winter-24 closing at £88.35/MWh, a loss of £1.38/MWh day on day. Baseload for the Day ahead settled at £17.26/MWh, down £64.24/MWh as a result of the strong renewables and low demand. It’s the lowest settlement since the Easter weekend.

Oil Market

  Brent Crude prices rose on Wednesday driven by a larger-than-expected decline in US crude stocks as the US Energy Information Administration (EIA) reported a 12.2 million draw in crude oil barrels in storage. Lingering concerns due to potential supply disruptions from Hurricane Beryl added to the upside. Despite reports that the storm is expected to weaken by the time it enters the Gulf of Mexico, the volatile weather conditions could still disrupt Mexico’s offshore oil production and export infrastructure. Lower trading volumes ahead of the US Independence Day holiday helped to cap gains however. Front month Brent increased by $1.10 a day to settle at $87.34 a barrel, the highest front month settlement price since April 30th. The West Texas Intermediate front month closed up by $1.07 to finish at $83.88 a barrel.

Markets this morning

Market fundamentals are in line with yesterday, with renewables making up a significant 73.7% of the power stack and the GB system operating in a long position. However, activity on the prompt is yet to get going. On the near curve the front month contract has retraced some of the previous days’ losses. After trading to a morning high of 77.23p per therm August-24 last traded at 76.89p, an increase of just under 1 penny on Wednesday’s close. In crude oil markets prices have moved down slightly day on day amid concerns over future demand levels and a slowing US economy while the U.S. Independence holiday will mute trading stateside today. Front month Brent is currently trading around $86.76 a barrel.