A de-escalation of tensions between the U.S. and Iran as well as the reduced risk of severe weather conditions led to sharp losses across the NBP market on Monday.

Gas Market

The recent de-escalation of tensions between the U.S. and Iran as well as a milder weather outlook fed into the sharp losses seen across the NBP prompt and near curve on Monday. The risk of a Sudden Stratospheric Warming (SSW) event, which can cause severe cold conditions, was reduced from an 80% likelihood to a 60% likelihood, taking pressure off supplies. Milder forecasts for Northeast Asia as well as a broader sell-off in commodities and other markets further supported the downside. March 26, the new front month contract, fell by 13.86p day-on-day, to settle at 81.34p per therm, its lowest close in over 2 weeks. Meanwhile, losses exhibited by the prompt were greater still as supplies remained robust and temperatures turned milder. The Within day contract fell sharply, declining by 17.30p per therm day-on-day, while Day ahead posted a 16.60p loss to close out the session at 86.40p per therm.

Power Market

An upward revision to temperatures forecast for this week weighed on the GB Baseload prompt market on Monday, with the Day ahead contract declining by 16.0% to close at £84.00/MWh. Curve products were also weaker, with downward pressure stemming from losses on the NBP gas market and a reduced likelihood of severe weather conditions during February. The front month contract fell by £9.65/MWh, or 10.4%, to close out the session at £82.85/MWh. Despite the sharp declines seen across the wider energy complex as well as significant drops experienced by other markets such as gold and silver, carbon prices staged a robust recovery on Monday. Dec 26 EUA’s gained €2.18 day-on-day to close out the session at €83.57 a tonne.

Oil Market

A de-escalation of tensions between the U.S. and Iran saw crude oil prices shed over 4% on Monday. Arrangements are underway for further talks between the two nations later this week, while comments made by Donald Trump further reinforced the belief that an agreement regarding a nuclear deal could be made. Further downward pressure was provided by a strengthening dollar and milder weather forecasts in the U.S. With geopolitical tensions easing, the market appeared to turn its focus back to the anticipated buildup of global oil inventories. The front month Brent contract shed $3.02 day-on-day to settle at $66.30 a barrel. The WTI contract for March delivery similarly fell by $3.07 to close out the session at $62.14 a barrel.

Markets this morning

Yesterday’s losses have continued into this morning, with the front month contract having already shed 5.60p per therm as the risk premium built up over the past two weeks declines. Contracts further out are following a similar downward trend, with the Summer 26 contract last going through at 70.40p per therm, a decrease of 1.90p on Monday’s close. Wind power generation levels are expected to remain above normal over the coming days, while temperatures are forecast to increase significantly from today. Crude oil markets have also fallen further this morning, attributed to the continued de-escalation of geopolitical tensions, although losses are muted. The front month Brent last went through at $66.11 a barrel, down just 19 cents on yesterday’s close.