This morning
The UK gas market has resumed its downward trajectory from Friday, with contracts opening in negative territory. The NBP front month contract March-24 has broken the 60.00p price barrier, last trading at 59.30p, while Summer-24 traded at 61.00 pence per therm. This morning’s weakness in UK demand, at 206MCM, is mirrored in the losses recorded in the prompt market, with the Day ahead and Within day contracts trading at 56.00p and 57.00p respectively. Significant losses have been recorded in the European carbon market this morning, with the EUA Dec-24 contract shedding €2.66 to last trade at €54.51 a tonne.
Gas Market
Market sentiment remained relatively flat on Friday, with UK gas prices showing minimal movement of less than 1.00 pence per therm. However, contracts did retreat from the gains seen in the previous session. The front seasonal contract Summer-24 ended the day at 62.08p, recording a 5.29p loss over a five-day average, while Winter-24 followed a similar trend, closing at 76.30p and returning to Wednesday’s record low levels. Healthy market fundamentals are supporting the recent market correction, as NBP gas contracts release significant risk premiums so far in 2024. With aggregated European gas storage ending the week at 65% capacity and weak demand, the market weakness clearly reflects the fundamental picture. In the prompt market the Day ahead contract traded below the 60.00p price mark for the second consecutive session, closing at 59.75 pence per therm on Friday.
Power Market
In line with the UK gas market, GB baseload power future contracts took a step backwards during Friday’s session. Contracts for near delivery took the brunt of the downward pressure, as power for delivery in March shed £1.12/MWh to settle at £57.13/MWh. The front seasonal contract, Summer-24 moved £0.65/MWh lower to end the day at £57.35/MWh a price not witnessed since 2021. Baseload for day ahead delivery closed at £61.48/MWh. EUA carbon contracts reversed the previous sessions gains to close lower once again on Friday. The Dec-24 contract opened at €57.86 a tonne and eventually closed at €57.11. Weakness in the wider fuel mix supported the bearish sentiment.
Oil Market
Global oil markets opened lower on Friday morning, however the commodity flipped between positive and negative territory as the day progressed and eventually settled higher. The International Energy Agency forecasts a 20,000 barrels per day slowdown in demand, which balanced out the positive impact of hopes for earlier interest rate cuts by the U.S. Federal Reserve this year. Brent crude hit a low of $81.89 and eventually closed at $83.48, a $0.61 gain session on session. Risk premium linked to the ongoing war in the Middle East remains priced into oil contracts as the Brent crude front month has traded at an average of $80.70 a barrel so far this month, a $1.55 premium to the previous month.
Friday in summary
Friday’s session saw a marginal decline in the UK gas market, extending the recent downward trend. Although contracts didn’t surpass a 1.00p price movement, weakness was evident when viewing the five-day average price movements. This trend is aligned with the fundamental picture, as aggregated European gas storage ended the week at 65% capacity amidst weak demand. NBP front month contract took a step closer to the 60.00p price barrier on Friday, closing 0.54p lower at 60.56p while Summer-24 contract closed at 62.08p. In the wider energy fuel mix EUA carbon markets reversed the previous session’s gains to close lower once again, the Dec-24 contract closed at €57.11 a tonne.
19 February 2024
