Near months of the NBP surged higher on Friday

Gas Market

The NBP near curve opened with sharp gains on Friday and these were extended through the morning with February peaking at 99.67p per therm as traders looked to cover short positions. Cooler temperatures along with lower wind generation has been forecast for the next two weeks and a prolonged cold spell raised concerns that European storages reserves which currently stand at around 50% of capacity could be dented. Earlier in week geopolitical risks added premium after tensions in Iran escalated and there were concerns when production levels dropped at the U.S. LNG plant at Freeport but that appears to have been resolved quickly and was not a contributing factor to Friday’s increases.  The February contract settled almost 3.00p below the high of the day at 96.75p. The summer contract increased by 4.78p to close at 72.96p, its highest close for two-months. The Spot and Day ahead closed 11.00p and 10.75p higher on Friday.

Power Market

Low wind generation is expected next week, and this coupled with the surge in near months on the NBP supported the baseload futures on Friday. Gains were higher on the near curve as February, the front posted the greatest gain of the day, £6.60/MWh to settle at £105.15/MWh. Trading for the summer contract was thin, and it was assessed £2.83/MWh up at the close. Early losses to Carbon EUAs were recovered on Friday and contracts closed flat. Baseload for the Day ahead was slightly lower at the close on Friday, however, wind generation is forecast to fall into the low single digits next week. Wind has averaged around 11.0GW last week and the lower levels next week will increase dependence on the higher price gas.

Oil Market

Crude oil prices settled marginally higher on Friday with Brent adding 37 cents a barrel while West Texas Intermediate gained 25 cents. Increased buying activity heading into the long weekend in the U.S. was the driver of prices on Friday while gains were tempered by the potential of increased supplies from Venezuela. Earlier in the week prices firmed, and Brent reached a new four-month high as tensions in Iran rose and fears of a possible blockade of the Strait of Hormuz increased. Around a quarter of all seaborne oil is transits through this body of water. Tensions in Iran appeared to have eased on Thursday when a possibility of a U.S. intervention seemed less likely.

Markets this morning

With the Martin Luther King holiday in the U.S. the crude oil markets may be subdued today but the rest of the world is still trading, and Brent is 61 cents down at $63.52 a barrel. The U.S. President’s comments at the weekend and treats to impose trade tariffs on nations not supporting his taking Greenland is weighing on prices this morning. The EU and the UK have expressed solidarity with Greenland and Denmark, but more talks will be needed to respond to Trump.  NBP futures have fallen steeply this morning with most of Friday’s gains being reversed. February last traded at 87.65p, down 9.10p per therm while the summer contract is exchanging 3.56p lower at 69.40p.