Wholesale natural gas prices eased on Monday with strong fundamentals weighing on the prompt and near curve

Gas Market

Fundamentals returned to the fore for the gas markets on Monday as near forecasts see temperatures return to seasonal norms while a glut of LNG deliveries expected over the coming weeks counters concern over dwindling storage levels. Geopolitical risks due to tensions in Iran prevented further declines to contracts past the front months on the NBP yesterday although talks between the US and Iran are to continue. The March contract opened with steep declines and traded down to 76.25p per therm, almost 9.00p below Friday’s close. The front month recovered a touch through the afternoon session as buyers took advantage of the discounted price leaving March to settle at 78.95p, posting a day-on-day loss of 6.21p. Contracts covering the summer months settled an average of 1.50p lower yesterday. The Spot and Day ahead products shed over 8.00p in response to the comfortable gas system as demand fell below the seasonal norm.

Power Market

Near curve contract for GB baseload power shadowed the movement on the NBP curve and European Power futures yesterday. As we witnessed on the gas curve, the near months posted the greatest declines with March settling £3.25/MWh lower at £80.18/MWh. Moving further along the curve, the front Summer and Winter contracts shed £0.85 and £0.15/MWh respectively. Baseload for the Day ahead recorded a slight increase due to lower wind availability. The carbon markets continued to firm on Monday as buyers rushed to take advantages of the weaker prices. There was some volatility in the morning session following the auction which triggered a minor selloff, but buyers returned to push prices higher in the afternoon. Carbon EUAs were an average of 2.9% or €2.38/ tonne higher at the end of play.

Oil Market

Warnings from the US Department of Transportation to American flagged ships to keep clear of Iran as they pass through the Strait of Hormuz unsettled the crude oil markets yesterday. The Maritime Administration urged vessels passing through the strategically important transit passage to use caution and veer closer to the Oman side while heading eastward through the Strait. Concerns that a conflict could disrupt crude oil deliveries through Strait supported prices yesterday. Talks between US and Iranian officials began on Friday and are set to continue but after yesterday’s warnings it’s not clear if progress is being made. Meanwhile production at the Tengiz oil field in Kazakhstan has increased to 60% of capacity after a recent fire and it is reported to return to full capacity of around 950,000 barrels per day within two weeks. Brent settled 99 cents higher at $69.04 a barrel.

Markets this morning

The GB gas system continues to show comfort this morning as LNG send out increases to cover almost 40% of this morning’s demand.  Near months have traded lower with March showing the largest decline of 2.31p to last trade at 76.64p per therm. The April contract last exchanged a penny lower at 75.50p and the full summer contract is 0.36p down at 73.75p.  Crude oil prices have turned lower in the last hour as the market weighs tensions in Iran with an oversupplied market. Brent for April delivery last exchanged at $68.99 a barrel, 5 cents below last night’s close. Carbon prices are also weaker this morning with the Dec-26 EUA product last going through at €80.69 a tonne.