The power market volatility is exceeding that of the gas market

UK gas prices continued to spiral upwards

UK gas prices continued to spiral upwards on Thursday with contracts for mid-winter months breaching the 150.00p mark before falling slightly towards the close of business.  The ongoing maintenance programmes on the Norwegian supply system saw Langeled flows drop below 30MCM yesterday.  Continuing uncertainty over Russian supplies and LNG availability heading into the winter months pushed near futures higher again with gains of up to 3.00p day-on-day.  The UK gas system ran short for most of the trading day, only moving out of deficit in mid-afternoon, by which stage prompt gas prices had recorded and retained gains averaging 4.25p.

The GB prompt power market volatility continued

The GB prompt power market volatility continued with day ahead baseload falling from Wednesday’s record high but remaining elevated at £223.50/MWh.  The day ahead index for the month so far now stands at £173.65/MWh.  The power market volatility is exceeding that of the gas market due to the tight supply margins currently prevailing. GB power futures saw further gains on Thursday with Q1 22 recording the strongest increase, gaining £5.05/MWh to settle at a new record high £143.35/MWh.  The front month also hit a new high, gaining £2.00 to settle at £133.75/MWh but remaining Q4 contracts recorded only marginal gains.

Crude oil resumed the downward trend

Crude oil resumed the downward trend seen earlier in the week with Brent crude shedding just over a dollar to settle at $71.45 a barrel.  Prices had risen early in the session on news that 75% of Gulf of Mexico production remained shut down following Hurricane Ida but fell back as   the U.S. Energy Information Administration inventory data, released in the afternoon, showed a smaller than expected fall in weekly crude stocks.  A larger than anticipated draw in gasoline inventories last week failed to rally the market and West Texas Intermediate shed $1.40 day-on-day to settle at $67.90 a barrel.  Carbon missions’ prices were virtually unchanged from Wednesday’s levels.

 The UK gas system has begun the day in surplus

The UK gas system has begun the day in surplus with forecast deliveries running 8MCM ahead of demand.  Despite low wind availability and gas-fired power generation meeting 53% of GB demand this morning, overall gas demand remains below the seasonal norm.  The healthier supply-demand situation compared to yesterday is not yet evident on the prompt gas market but near futures gas prices have eased overnight.  The front month is down by 0.90p and the full Winter 21 contract by 0.86p.  On the oil market, Brent crude has fully recovered yesterday’s loss to currently trade at $72.60 while carbon emissions prices are little changed overnight.