A further eight LNG cargoes due to berth at UK ports

A halt to gas flows from Russia to Germany via Poland saw gas prices surge

A halt to gas flows from Russia to Germany via Poland saw gas prices surge on Monday morning but the markets settled with only minor gains on the front month at close of business. The general strength of UK supply from Norway and from LNG send-out was encouraging, as was news of a further eight LNG cargoes due to berth at UK ports in the next 2 weeks. Demand rose to its highest level since March however, driving spot and day ahead prices up by 15.60p. Early gains on near futures contracts were retraced and while the front month and Q1 22 finished 1.49p and 0.80p higher, contracts for the remainder of next year fell by an average of 2.95p.

Fuel shortages in Eastern Europe are causing major concerns

Fuel shortages in Eastern Europe are causing major concerns for power supply through the current winter. Ukraine and Turkey are experiencing shortages of coal and gas for power generation. The situation in Western Europe is improving with increasing LNG supply and the markets reflected this, and falling carbon prices, to shed some premium yesterday. The day ahead baseload power price doubled to £260/MWh on a forecast collapse in wind generation today. Having been providing over 10GW in recent days, wind is expected to average under 2GW today as demand rises with lower temperatures.

Brent crude gained 33 cents on Monday

Last week’s modest reversal of the recent upward trend on the oil market has ended, temporarily at least. The likelihood that OPEC+ will continue to increase production rates month-on-month still raises the possibility of market over-supply in the current fragile demand recovery situation. The prospect of increased Iranian output if renewed talks between the U.S. and Iran lead to an easing of sanctions also raises the possibility of market imbalance. Brent crude gained 33 cents on Monday to settle at $84.71 while West Texas Intermediate was up 48 cents to $84.05 in a narrowing of the differential between the two major crude benchmarks. EU ETS unit prices fell by €1.77 per tonne to their lowest settlement levels in 2 weeks.

Demand on the UK gas system continues to rise

Demand on the UK gas system continues to rise with falling temperatures and a collapse in wind availability this morning. Wind generation has fallen below 2GW, having supplied over 10GW yesterday. The additional gas demand for power generation has pushed overall demand to 262MCM, or 12MCM above the seasonal norm. The system remains comfortably supplied however, and while prompt prices will almost certainly gain, the front month has opened 1.40p down on last night’s closing levels. Oil prices are virtually unchanged overnight while carbon emissions prices have recovered around half of yesterday’s losses.