The impact of gas markets pulling oil upwards remains

Contracts moved between gains and losses across the day

The UK gas market displayed a slightly different side on Tuesday and although contracts moved between gains and losses across the day, we did not see the wild swings in prices that have been a feature of late.  The market opened lower from the outset and then added a steady amount of premium over the course of the morning session.  This premium was eroded steadily over the course of the afternoon session and contracts at the front of the curve finished well off their previous settlement.  The gap between the highs and low was still wide but the constant huge gains and losses of previous sessions was not apparent.  At market settlement those contracts for Winter delivery were down by just under 11.00p on average.  The full 2022 contract fell by 3.41p to close at 143.80p per therm.

GB baseload power costs were pushed lower yesterday

GB baseload power costs were pushed lower yesterday on a combination of lower gas costs and retreating carbon prices.  Once again contracts at the front of the curve were most impacted with substantial losses on periods out to Q1 2022.  The front month November contract shed £15.50 to close at £212.50/MWh while remaining contracts for Winter delivery fell by just over £11.00 on average.  The EUA carbon market was under severe pressure yesterday and losses in excess of €2.00 were recorded on all contracts.  UKA carbon contracts declined in valued by £4.60 per tonne for all periods.

 Crude oil prices recovered the losses

Crude oil prices recovered the losses from the previous session with ease during yesterday’s market as contracts added premium in steady fashion over the course of the day.  The market opened firmer from the outset and held on to gains for the remainder of the day.  The market for Brent crude peaked at $85.13 a barrel and did not finish too far off this high point.  The see saw nature of the crude oil market in recent sessions is almost certainly a function of the difficulty in determining demand in the short term.  The impact of gas markets pulling oil upwards remains a feature in the overall mix and oil once again moved above the $85.00 a barrel mark.

Losses from yesterday have already been recovered

The UK gas market has opened higher and the losses from yesterday have already been recovered.  The front month November contract is up by 11.07p as it trades at 236.98p while December is priced at 245.50p, up by 9.96p.  Other contracts have yet to trade but bid/offer spreads would suggest upward price pressure along the full curve.  The has been little fundamental change from yesterday and in fact gas demand is slightly lower than yesterday and the system is operating with a small surplus.  EUA and UKA carbon markets are also up this morning and gains are in the order of €1.50 per tonne.  The Brent crude contract is back below the $85.00 a barrel mark at $84.32.