Reports that Russia has reduced gas flows through Ukraine has spooked the market this morning

Gas Market

NBP futures were little moved after a subdued day in the gas markets on Monday.  Focus turned to short term weather forecasts as premium due to of the end of the gas transit agreement has already been priced in for the most part.  The front months opened softer and dipped by around a penny but failed to gain momentum through the session. It was the last day for January and the Quarter-1 contract on the ICE platform and both settled within 0.10p of Fridays’ close, January eventually settled marginally down day-on-day. The Spot and Day ahead eased by 0.45p on a comfortable gas system but contracts for next week were higher at the close because of the forecast for temperatures to fall below freezing in places which should increase heating demand.  

Power Market 

Low liquidity in the baseload power market saw near months being marked higher yesterday.  There were gains to the carbon early on which countered the minor decline to the NBP.  Although trading was thin, the January contract did attract the lion’s share of activity on the day and settled £2.15/MWh higher at £105.45/MWh. Remaining contracts out to next winter were less than a £1.00/MWh up at the close. Robust wind forecasts for the new year and into next week weighed on the prompt on Monday.  Baseload for the Day ahead eased by 40.0% or £33.88/MWh to settle at £51.02/MWh.  Wind generation is expected to top 17.5GW on Tuesday and hold into next week.   

Oil Market

Brent moved higher again on Monday albeit, the gain of 22 cent was modest.  The February contract for Brent settled at $74.39 a barrel and notched up a three-day gain streak but is due to expire on Tuesday. The market is expecting the latest Purchasing Managers Index from China, which is due out on Tuesday, to be higher than November’s score of 50 now that the government have taken extra measures to boost the economy. Also adding to the upside was speculation that the new US president will look to trim Iran’s crude oil exports by around 1m barrels per day after he takes up office in January. Donald Trump imposed sanctions on Iran’s oil exports in 2019 which limited exports to around 660,000 barrels per day, Iran is back to exporting around 1.6m barrels per day.  

Markets this morning

Reports that Russia has reduced gas flows through Ukraine has spooked the market this morning. The new front month, February is up 2.31p per therm to 112.13p.  The Summer-25 contract has not seen as much action yet but has added a similar amount to last trade at 116.70p.  The gas transit deal is due to expire tomorrow and countries relying on this supply have already made alternative arrangements for gas supplies. Brent is up 49 cents to $74.48 a barrel as China’s PMI has increased for December.