The availability of Russian gas during the Summer is driving risk premium into contracts
28 April 2021
Front and near-term contracts added 3.00p in premium as an issue emerged regarding gas flows through UkraineThe UK NBP gas market has a very benign opening on Tuesday with some near-term contracts posting minor gains in early trading. While there were some restrictions on the gas side due to maintenance issues in the North Sea, the gas system was relatively well supplied with a surplus of 8MCM being predicted. The slack market did not last for long with volatility returning just before mid-day as contract began to firm significantly. Over a very short period, front and near-term contracts added 3.00p in premium as an issue emerged regarding gas flows through Ukraine. Concerns regarding availability of capacity for Russian exports to Europe caused an immediate spike in prices.
GB baseload power futures recovered the remainder of the premium that was lost on Friday last as gas led gains came into the baseload power market. There is no doubt that power fundamentals continue to be reliant on gas fired generation and the direction of baseload power prices bear this out. On the day CCGT gas generation dominated the power stack with over 54%. Baseload power prices firmed on the day on higher gas and carbon costs. The front month May contract added £2.35 which closed at £65.15/MWh. Across the remainder of the curve contracts were up by £1.88 on average.
Baseload power prices firmed on the day on higher gas and carbon costs