A fall-off in Russian supply to Western Europe brings the downward trend to an abrupt end

News of a significant pick-up in LNG deliveries to the UK

News of a significant pick-up in LNG deliveries to the UK was countered yesterday by a fall-off in Russian supply to Western Europe, bringing the downward trend in European gas prices of the previous 5 days to an abrupt end.  LNG deliveries are set to increase with 8 vessels due to dock at UK terminals over the coming 3 weeks but contracts for the current winter months jumped by over 18.0p on renewed concerns for Russian supply.  Contracts beyond the current winter remained flat or indeed, further out the curve, eased day-on-day.  Despite a healthy supply-demand balance and forecast higher wind availability today, prompt gas prices moved higher with gains averaging 7.2p.

Near curve power futures recorded strong gains

Near curve power futures recorded strong gains on Wednesday as gas prices turned higher, and the supply-demand outlook remained tight for the winter months.  Summer 22 gained marginally while seasonal contracts further out the curve saw mixed movement. Carbon prices were little changed for a second consecutive day. The day ahead baseload contract fell for a second consecutive day, shedding £8.00/MWh to settle at £184/MWh.  Wind generation levels fell below 5GW yesterday but were forecast to pick up on Thursday before falling off again heading into the weekend.

Peak oil demand as soon as 2025

Crude oil eased slightly again on Wednesday as a plethora of reports produced some conflicting signals regarding economic recovery and oil demand.  The annual World Energy Outlook report from the International Energy, released early in advance of COP 26 in Glasgow, reaffirmed growth in oil demands this year but predicted peak oil demand as soon as 2025 if major consumers adopted Net Zero Emissions targets for 2050.  OPEC meanwhile issued its monthly report which downgraded demand growth for this year but predicted increased demand for 2022 while the IMF released a pessimistic outlook for demand growth in light of inflationary trends.  Brent settled just 24 cents lower at $83.18 and WTI was also down 20 cents to $80.44 a barrel.

Gas-fired power reduced demand this morning

An early supply deficit on the UK gas system has been rebalanced as wind generation levels pick up, reducing gas-fired power demand this morning.  The impact on prompt gas prices has yet to be seen but near futures contracts have opened sharply higher again with gains of up to 20.00p on winter months.  Exports to the near continent are running at almost 50MCM this morning as Western European hubs offer a premium to UK prices on concerns over Russian supply.  The modest easing of oil prices on Monday and Tuesday has reversed with Brent crude gaining $1.00 a barrel overnight while EU ETS unit prices are also up overnight.