NBP futures fell on Thursday amid growing optimism for peace talks ahead of Friday’s summit in Alaska

Gas Market

NBP futures fell on Thursday amid optimism for peace talks ahead of Friday’s summit in Alaska. Hopes were raised that Friday’s meeting between Presidents Trump and Putin could lead to further talks on a ceasefire while also possibly paving the way for a return of Russian gas and oil to the markets. September fell to 78.10p per therm before rebounding to 80.73p after a short burst of heavy buying to cover short positions.  The front month eventually closed 1.73p lower for the day at 78.81p.  Further along the curve, the Winter-25 contract yielded just over a penny to settle at 86.53p, the lowest settlement since the end of April.  Prompt prices eased on the back of a comfortable gas system while strong imports through the Langeled feed got to 52mcm leaving the Spot and Day ahead for the NBP down 1.40p and 1.85p respectively.

Power Market

The weakness in the NBP gas market spilled into GB baseload power futures on Thursday as near contracts declined by over 1.5%. The front month, September, posted the greatest loss of the day, shedding £1.40/MWh while the Winter-25 contract settled with a loss of £0.95/MWh. Softer carbon prices also added to the downside yesterday with EUA contracts out to Dec-27 declining by 1.0% or an average of 76 cent per tonne. Baseload for the Day ahead eased despite forecasts for wind generation on Friday to dip below 4.0GW which is down around 2.0GW on the average levels this week. The contract settled at £81.85/MWh while the average price for the month is running at £76.58/MWh.

Oil Market

Brent settled at its highest level in over a week yesterday spurred on by hopes that the U.S. fed will cut interest rates next month. The Federal Reserve is under pressure to bring in a cut in interest rates next month and the Treasury Secretary has hinted that a half-percentage-point cut could be possible. Lower interest rates leave borrowers more spending which can lead to increased demand. Crude oil prices also rose on the back of threats from President Trump ahead of the meeting with President Putin scheduled for Friday in Alaska. Trump is said to have threatened severe consequences if the summit does not lead to more talks and get both Ukraine and Russia to discuss a ceasefire. It is not clear if this means he will revert to imposing secondary sanctions on buyers of Russian energy. At the close, Brent was $1.21 up at $66.84 a barrel.

Markets this morning

GB gas demand is expected to drop below 127mcm for today and the system is showing a large surplus. But the eyes of the world will be watching for news from today’s summit in Alaska. As the meeting between Presidents Trump and Putin is scheduled for later today the European energy markets are likely to be closed by the time early reports emerge. In the meantime, NBP futures have moved lower after opening a touch firmer. The September contract is 0.63p per therm down at 78.18p while contracts further along the curve are generally between 0.50p and 0.75p lower.  Carbon EUAs are also declining with contracts down by around 20 cent per tonne while in the crude oil markets, Brent has eased by 54 cents to $66.30 a barrel.