NBP gas contracts reverse the gains from the previous three sessions

Gas Market

NBP gas prices tumbled across Tuesday’s session despite opening strongly and pushing higher in early morning trading. The front month season opened at 100.50p/th before reaching its intraday high of 101.00p/th, while the Oct-24 contract opened 1.49p/th higher than Monday’s settlement. However, NBP prices fell and continued to track lower from late morning until the close. The fall in price was generally an unwinding of the risk premium that had slipped into contracts across the previous three sessions. Gas prices were also pressured by the decline in oil markets and the wider energy complex. However, the movement on the gas market was an overstated response to those losses, as the October contract fell as low as 83.48p/th, before settling 5.36p lower at 84.58p/th.  

Power Market

GB baseload power futures fell across the board pressured by the decline on the NBP and across the energy complex. With all traded energy commodities falling across Tuesday’s session power futures were pressured by not only a weak gas market but also a declining carbon allowance market. The front month GB power contract posted the largest losses falling by £3.85/MWh to £72.00/MWh, while the Winter-24 contract shed £3.33. The EUA allowances market tracked European gas markets lower as the spot market fell by €1.40/tonne in Tuesday’s session. Looking at the allowance market in isolation there are two counteracting factors that could influence proceedings, the return of biweekly auctions and the impending compliance deadline.

Oil Market

Oil markets returned to decline following Monday’s rebound that bucked the recent downward trend. Brent crude fell below $70/bbl for the first time since December 2021 as concerns for global demand persisted. The Brent front month contract fell to $69.19/bbl at the close following the OPEC+ monthly report showing that the cartel had revised down its demand forecast for 2024 and 2025. Since July 2023 OPEC+ had been forecasting a growth in demand of 2.11 million barrels per day for 2024, but in its recent report that has been reduced to 2.03 million barrels per day. Also weighing on oil markets was continued concern for the Chinese economy and the demand at the world’s largest importer of oil.

Markets this morning

Following the large declines on energy markets yesterday contracts have rebounded in early trading. Oil prices are trading higher as concerns that Hurricane Francine could hamper production in the Gulf of Mexico while a fall in US inventories is also supporting prices. NBP gas markets have also rebounded following yesterday’s losses with the same hurricane raising the concerns for delays of US LNG exports to Europe. Trading on the prompt is muted at this early stage. Day ahead has exchanged hand at 86.10p/th while Within day has yet to trade. Despite the Langeled pipeline still out for maintenance the UK system is once again oversupplied this morning.