Wholesale market reacts to US and China trade war
On Tuesday, early trade saw gas prices at the NBP resume a downward trajectory but it didn’t last long as global stock markets rebounded and wind output declined.
Key contracts, including the May 25 and Winter 25 contracts, settled just north of their previous close, with both contracts closing just 0.3p/therm (0.01p/kWh) higher day-on-day.
A gradual recovery in global stock indices across the session may have provided a price floor for gas prices, preventing a renewed sell-off in energy and commodity markets.
Stock markets are interconnected globally. A rebound in major stock markets and thus indices, such as those in the US (S&P 500, Nasdaq) or Europe (FTSE, DAX), can influence global economic activity and energy demand forecasts, impacting global gas markets.
Additionally, low wind output so far this week has likely served as a secondary source of support at the front-end.
According to data from National Grid, wind turbine generation averaged just 1.4 GW across Monday and Tuesday. Lower renewables likely bolstered demand for gas-fired (CCGT) power which averaged 13.7 GW over the same period, accounting for 49% of the British generation stack.
In other news, the US has introduced sweeping tariffs on global imports today. The ‘baseline’ import duty of 10% will apply to the majority of UK goods entering the US.
The European Union will face a tariff of 20% for most of its goods and China will have to contend with a 104% duty. China has promised to take ‘resolute and forceful’ countermeasures in retaliation to the tariffs, stoking fears of a full blown trade war between the world’s two largest economies.
The market has opened at a slight discount so far this morning, as stock markets once again weaken in response to the first day of the tariffs. The Winter 25 front-season contract is currently being offered 1p/therm (0.034p/kWh) below its previous settlement at time of writing.
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Price commentary courtesy of Crown Gas and Power 