Brent settled lower for a second day on Thursday after the E.I.A. reported a surprise build in U.S. crude oil reserves

Gas Market

On Thursday the gas markets continued the recent trend to switch tack during the session as early losses were reversed while near months ticked up through the afternoon. The October contract for the NBP traded between 77.30p per therm to the day’s high of 79.48p before settling just over a half a penny higher day-on-day at 79.12p. A similar pattern played out for the near curve with the Winter contract ending the session 0.65p up at 86.06p.  Higher carbon prices due to increased compliance buying provided some upside later yesterday while the prompt was propped up by forecasts for lower wind generation for Friday and a short system. The Spot and Day ahead products added 1.30p on the day while an identical gain for the Balance of month aligned the contract with the front month.

Power Market

Forecasts for lower wind generation provided upside for the Day ahead baseload yesterday as the contract settled at £84.25/MWh, the highest settlement for 10-days. Generation from wind has been averaging over 11.0GW for the last week but is expected to fall by around 50% on Friday. Baseload futures added premium on the day with late gains to gas and higher carbon offering support. Near curve contracts excluding November were £1.00/MWh higher on average yesterday.  As the deadline for compliance draws closer, trading activity in the carbon markets has increased and continues to push prices higher. European Allowances for Dec-25 and Dec-26 added around 62 cent per tonne on Thursday.

Oil Market

After the significant drop in crude oil prices on Wednesday there was little to halt the slide to prices yesterday.  Brent fell by a further 61 cents a barrel after the latest inventory report from the Energy Information Administration.  The U.S. government body reported a surprise build of 2.4m barrels of crude oil to reserves when industry was expecting a draw of around 2m barrels. U.S. crude oil reserves now stand at 420.7m barrels which is around 4.0% below the five-year average for the time of year according to the E.I.A. The data was released a day later this week owing to the Labour Day holiday earlier in the week.  Also weighing on the market is the weekend meeting of OPEC+, and expectations that the group will continue to increase production output.

Markets this morning

The GB gas markets opened flat this morning and early trades for the near curve of the NBP have been sideways. The front month, October, has traded in a tight range between 80.06p and 78.86p per therm with the latest exchange going through at 79.70p. Liquidity is thin past the front month as market is struggling to find direction.  A short gas system may give a lift to the Spot price but the Day ahead product was down at 78.65p on the last trade. The crude oil markets are expecting an increase in output to be announced by OPEC+ after their meeting on Sunday and Brent is 16 cents a barrel down at $66.83 this morning.