Near term gas futures on the NBP eased for a third day
Near term gas futures on the NBP eased for a third day yesterday with price pressure primarily focused on the on the Winter 2021 contract. This steady decline in the gas market is a welcome development but contracts remain elevated and strong risk premium remains in all periods. The front month October contract traded down to a low 170.24p at one stage but staged a mini rally in the middle part of the session. On the day this contact moved by 7.35p between the high and the low before settling at the lower end of the range at 174.40p. Further out the curve seasonal contracts pushed higher with just over 2.00p per therm on average added.
On the power prompt prices eased lower
Increased wind generation on the UK gas system provided a modicum of relief to the market with some near-term baseload power contracts shedding premium. The December 2021 baseload contract did go against the grain however as this contract added £4.90 to close at £184.65/MWh. Further out the curve longer term baseload power contracts continued to push higher. Seasonal contracts for Summer 2022 forward added just over £2.00/MWh on average. On the power prompt prices eased lower as the minimum supply margin increased. The spot finished at £152.46/MWh, down by £4.00.
Crude oil markets continued to climb
Crude oil markets continued to climb higher during the session on Thursday and for the third day in a row the market posted gains. The market continues to respond to the large decline in U.S. stocks and to the fact that crude oil reserves in the United States have fallen to their lowest level in over three years. The recent seasonal disruption in the Gulf of Mexico did cause a temporary decline in production although output continues to ramp up. There is also no doubt that increased economic activity is causing an upturn in demand and in addition, the pull from record high gas prices is also having an impact.
The gas market has opened firmer this morning
The gas market has opened firmer this morning as the market seeks to recover the losses from the last three sessions. Over the last few hours, the gains have narrowed somewhat but prices at the front of the curve remain up by between 1.00 and 1.50p per therm. Contracts further out the curve have yet to trade so there is no indication that these periods are continuing to build premium following yesterday’s gains. High levels of wind generation remain on the GB power system, and this is keeping a lid on gas demand. Crude oil prices continue to firm and a further 27 cents has been added to the Brent crude contract which is priced at $77.52 a barrel.