Economic woes in China dominated Tuesday’s oil trading with the front month contract falling to its lowest level since late July.

Gas Market

Tuesday’s market was best described as directionless, with prices moving sideways from Monday’s close. Day on day movements were a mélange with a near 50% split between minor gains and losses being posted across the curve. The market initially looked to be posting losses of 4 to 5 pence per therm before, what has become a signature of the NBP lately, a late rally saw prices finish essentially at parity. The front month lost 0.55p/th being assessed at 119.11p/th while the Q2-24 contract gained 0.04p/th. In stark contrast to the curve market, the prompt increased in value due to an increase in demand from the power sector. The Day-ahead contract posted gains of 5.55p/th closing at 99.05p/th amid a short system and an expected increase of 53% in gas for power demand. LNG send-out was down 8%, coupled with exports to the Netherlands for the first time in almost 4 weeks, which contributed to the short system.  

Power Market

With the NBP gas market lacking any purpose yesterday far curve GB baseload contracts took direction from a strengthening EUA carbon market rather than the weakening UK equivalent and softening coal markets. The largest gains were posted on the thinly traded Summer-26 contract, which posted gains of £3.25/MWh session on session. Carbon increased as a result of an increase in buying activity with over 25 million tonnes traded on the day. The Day-ahead baseload contracts stepped higher as wind generation was reforecast down to within seasonal norm levels for the rest of the week. Not only is gas generated power more expensive, the increased gas demand also resulted in an increase in the input fuel, helping to push Day-ahead higher.

Oil Market

The global oil market’s recent recovery from last week’s 3-month lows stalled with Brent front month crude prices down a mere $0.05 per barrel. Prices strengthened initially on the back of a report from the International Energy Agency which forecast an increase in oil demand for 2024 following on from the bullish statement from OPEC on Monday. The latest Consumer Price Index data from the US also indicated that inflation was slowing with consumer prices remaining unchanged in October compared to September. The slowing inflation also fed into the belief that the Federal Reserve would cease the interest rate hikes that had plagued the market and curbed oil demand forecasts. Brent Front month eased prior to closing with traders noting an easing of tensions in the Middle East and uncertainty with regard to US oil inventories.

Markets this morning

UK gas contracts have opened higher this morning amidst increased demand due to the fall in wind generation witnessed earlier in the week. LNG send out is lower again today, down 3mcm at 63 mcm, having seen a reduction of 8% yesterday. As a result, near curve contracts have increased by approximately 3.00p/therm and day-ahead has increased by 9.7p from Tuesday’s close. Norwegian gas flows have stepped higher to meet the increased demand and falling LNG supply, helping to keep the system balanced. Oil prices have declined again this morning as the market awaits the release of inventory data from US Energy Information Administration later on Wednesday.

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