UK gas market experienced slightly less volatility
Following rumours of pre-commissioning work on the Nord Stream 2 pipeline, Gazprom yesterday announced that it expected to ship 5.6bcm on the line by the end of the year. The sell-off on Western European markets accelerated and while the UK gas market experienced slightly less volatility on Thursday, with a price swing of 12.00p on the front month, the outcome for prices was more dramatic as near futures contracts settled 10% lower day-on-day. The September contract dipped below 100.00p for the first time this month and settled 11.87p down at 99.74p. Further downside may be limited in the short term at least by the fact that storage reserves remain at perilously low levels for this time of year.
GB baseload power prices fell heavily again
GB baseload power prices fell heavily again on Thursday as gas and carbon prices for the remainder of this year tumbled on news of Nord Stream 2 in Q4. The announcement by Gazprom that it expects to deliver 5.6bcm on NS2 by the end of the year was welcomed by the markets, particularly the Western European gas markets and prompted a sell-off on the front winter. The day ahead contract relinquished most of Wednesday’s big gain as wind generation is fore-cast to increase today. That would not be any great event given that wind generation languished below 1GW throughout the trading day yesterday.
Oil prices fell for a sixth consecutive session
Oil prices fell for a sixth consecutive session with Brent crude down by $1.78 to settle at a 3-month low of $66.45 while WTI was down almost as much to settle at $65.46 a barrel. Front month Brent is down almost $5.00, or 6.6%, over the past 5 sessions. The continuing spread of the Covid-19 Delta variant has all but wiped out hope of any significant oil demand recovery this year. The market came under further pressure as falling U.S. jobless numbers saw the dollar strengthen to its highest point of the Biden Presidency so far. Carbon prices fell heavily on foot of the slump in European gas prices and EU ETS unit prices shed over €2.50 per tonne while UK Allowances were down by over 2.00 per tonne.
Crude oil prices have moved marginally lower
With wind generation yet to pick up as forecast, gas-fired power generation is again the main source of gas demand this morning. Overall demand is down on yesterday however and the UK gas system is again forecast long. Prompt gas transactions are not showing as yet but near futures have recovered some of yesterday’s heavy losses in early trading. The market reaction to the news of supply via Nord Stream 2 in Q4 has been tempered by Gazprom’s prediction of deliveries of 5.6bcm over the line this year. This represents only 10% of NS2 capacity. Crude oil prices have moved marginally lower again overnight.