NBP futures recovered some of Monday’s losses yesterday

Gas Market

Cooler temperatures are forecast for northern Europe over the weekend and this combined with lower levels of wind generation provided some support to prompt and near months of the NBP yesterday. The Day ahead added 1.50p per therm while on the curve, November, front month reversed some of Monday’s losses by adding 0.85p.  The November contract will expire on Thursday and trading activity was also focused on December yesterday which settled at 82.38p, up 0.81p. European gas storage levels remain around 83% of capacity which is about 12 percentage points below levels seen at this time last year and 10 points below the five-year average.  While not a concern for the moment a cold start to the winter could cause gas to be withdrawn at a faster pace and change the mood in the market.

Power Market

Support for GB baseload power futures arrived from increased gas and carbon prices on Tuesday.  Near curve months added £1.20/MWh on average yesterday while the Summer-26 contract was marginally higher at the close and settled at £70.50/MWh. Cabon prices rallied after the recent streak of losses which prompted buyers to return to the market and take advantage of the discounted prices. At the close, the Dec-26 contract for EUAs was 61 cent per tonne higher. Prompt prices firmed on Tuesday with baseload for the Day ahead adding £18.69/MWh or 32% to settle at £77.50/MWh.  Forecasts for wind generation to decline going into the weekend provided some upside while heating load is expected to increase as temperatures fall.

Oil Market

After posting the largest one-week gain since June last week, crude oil prices have moved back into reverse gear this week.  Last week’s gains were largely down to the announcements of fresh sanctions on Russian oil by the U.S.  The latest round of sanctions targeted Russia’s two largest oil companies, Rosneft and Lukoil and earlier in the week Lukoil said it would sell its international assets in response to the sanctions. Reports also appeared yesterday that refineries in India have not placed any new orders for Russian crude oil since the latest sanctions were imposed. It is likely Russia will look to increase output through OPEC+ in December although it is not clear what the group will decide given OPEC+ have steadily increased output since April. Brent fell a further $1.22 yesterday to settle at $64.40 a barrel.

Markets this morning

The energy markets are flat this morning with little change in fundamentals to provide direction to prices. In the gas markets, NBP futures are oscillating between losses and gains with contracts that have traded within +/-0.38p of last night’s close.  November, on its penultimate day as front month on the ICE platform is 0.17p up at 79.78p per therm while the Summer-26 contract has last exchanged at 75.75p.  In the crude oil markets, Brent has been trading sideways with the last trade at $64.57 a barrel ahead of tomorrow’s meeting between leaders of the U.S. and China.