Gas Market
UK gas prices turned negative again yesterday, with the front-month contract dropping by 1.43p to close at 113.55p per therm. Prompt prices also declined, as the Day-Ahead contract fell by 0.85p to 112.70p/th, driven by continued comfortable market fundamentals. The recent downturn in European gas prices is largely attributed to market speculation that an end to the war in Ukraine could lead to a glut of Russian gas supplies. However, a draft document from the EU confirms that the bloc intends to secure more gas from alternative sources, including the U.S., while accelerating the expansion of renewable energy to reduce overall reliance on fossil fuels. EU Energy Commissioner Dan Jorgensen stated that the EU would propose “financial instruments” next week aimed at decoupling retail power prices from high gas prices.
Power Market
Yesterday’s activity in the UK Power market was more muted compared to the NBP. Along the curve, the March 2025 and Summer 2025 contracts declined by £1.30/MWh and £0.83/MWh, respectively, reflecting the ongoing bearish sentiment stemming from weakness in the gas and carbon markets. The Day-Ahead price still fell sharply by 21.8% to £70.41/MWh, driven by a strong rise in wind generation and higher temperatures reducing demand.
Meanwhile, European carbon prices sank to a six-week low with the Carbon EUA 2025 contract falling €0.95 to €72.61 per tonne and the British UKA Dec-25 contract plummeting £2.36 tonne to £40.00 per tonne.
Oil Market
A combination of factors provided support to crude oil prices on Thursday. Crude oil flows through the Caspian Pipeline Consortium, a large pipeline linking Russia to Kazakhstan, have been curbed by around 35% after a pumping station was hit by a Ukraine drone attack earlier in the week. When running at maximum capacity the pipeline can discharge 1.4m barrels per day. Also adding to the upside yesterday was the growing tension between the leaders of the U.S. and Ukraine and the absence of a Ukraine voice at the peace talks. Brent for April delivery settled 44 cents higher at $76.48 a barrel, the U.S. benchmark, West Texas Intermediate settled at $72.48 up 38 cents a barrel.
Markets this morning
Reports of Russia targeting Ukraine’s gas infrastructure along with an unplanned outage at the Asgard field provided early support to the near months of the NBP this morning. Gassco the Norwegian gas operator have reported around 7mcm of supplies may be impacted and have yet to post a resolution date for the processor issue. Recent trades have seen the early premium being pared back and March has reversed off the early high of 115.24p per therm and has last exchanged at 113.85p which is just 0.30p above last night’s close. Crude oil prices are in decline this morning with Brent reversing yesterday’s gain as the April contract last traded at $75.88 a barrel.
21 February 2025
