Proceedings on the NBP gas market were dominated by the proposal of a ceasefire between Israel and Hezbollah

Gas Market

The NBP gas market opened in negative territory on Thursday with all traded contracts exchanging hands below Wednesday’s close. October, the front month contract, traded as low as 88.10p/th as the market awaited news that Israel would conform with the proposal, led by the US, for a 21-day ceasefire with Hezbollah. The market remained rangebound for most of the day until the afternoon when confirmation that Israel would reject the proposal pushed gas prices higher. The gas market is concerned by the risk of contagion in the Middle East and what that could mean for the global supply of natural gas. Despite the Middle East being rich in oil, the risk to supplies appears to be less of a concern to global crude markets than the gas market. As gas contracts increased, with the winter-24 peaking at 96.99p/th, Brent crude oil declined in value.  

Power Market

The majority of GB baseload power futures increased for the second consecutive day, taking the lead from a strong NBP market. However, the increase on the power futures was more muted than the gas market. The baseload contract for October increased by 0.6% compared to 1.3% increase on the gas market. On the prompt the day ahead baseload contract tumbled by £19.00/MWh due to an expected increase in wind generation over the coming days. The system operator in GB is forecasting as much as 16.4GW of wind generation on the system on Friday. The Dec-24 EUA contract tracked European gas movements closely as it increased by almost 1.0% from Wednesday’s close. The surrender period for 2023 ETS submissions expires on Monday which could see increased buying activity.  

Oil Market

Oil prices declined by 3% as the market shrugged off the events in Israel and was hopeful for greater supplies of oil by the end of the year. Saudi Arabia, according to reports on Thursday, has abandoned its unofficial price target of $100/bbl and is set to increase production from December. Saudi Arabia, the world’s largest exporter of crude oil, in conjunction with the rest OPEC+, had been concentrating on cutting production in order to try and push crude oil prices above $100/bbl. However, crude prices have fallen this year as the US and other countries stepped in and filled the void. Oil prices could have fallen further yesterday but further information in relation to the latest round of stimuli for the Chinese economy capped the losses in the hope demand for oil there would grow. The front month Brent contract closed at $71.60 a barrel, a decline of $1.86.    

Markets this morning

NBP gas prices have stepped back slightly from yesterday’s settlement. President Netanyahu has stated that the Israeli government will continue to discuss the ceasefire proposal in the days ahead which has helped gas prices retreat marginally in early trading. On the prompt gas prices are also retreating amid high wind generation and a system that is almost 20mcm oversupplied based on the latest supply and demand nominations. Crude oil, with the front month Brent contract at $71.81/bbl, is essentially flat to Thursday’s settlement. The market this morning continues to weigh up the expected increase in production by OPEC+ and the latest Chinese stimulus package.