The full calendar 2022 gas contract has been in decline
The full calendar 2022 gas contract has been in decline for multiple sessions, but this downward trajectory was somewhat halted on Tuesday as prices were firmer at the close. The higher finishing point did not tell the full story however as gas contracts moved between gains and losses over the course of the day. Gas demand increased to over 260MCM as colder weather saw distribution heating demand grow although power demand is expected to decline in coming days on increased renewable power availability. The front month December contract fell to a low of 162.00p per therm before recovering to close at 176.20p/therm, a swing of 14.20p. On average contracts for Winter deliver periods gained 5.00p per therm.
The GB baseload power prompt drooped sharply on Tuesday
The GB baseload power prompt drooped sharply on Tuesday as the availability of supply from renewable sources improved. Wind generation was expected to double to 5.8GW today with output expected to grow to 7.9GW for the remainder of the week. As a consequence of this the spot price declined by £92.00 to £168.00/MWh. The baseload power curve continued to track movements in the wider energy complex and curve contract firmed on higher fuel and EUA carbon costs. The Front month December contract added £3.50 to close at £176.00/MWh while remaining contracts added just over £3.00 on average.
It would appear that the market remains conflicted
Following two sessions of modest gains the crude oil market traded rangebound during Tuesday’s session. The spread between the high and the low came in at $1.47 as the market moved between modest gains and losses over the course of the day. It would appear that the market remains conflicted between the prospect of OPEC+ increasing production in the coming months and the possibility of the market going into oversupply with the demand outlook not altogether clear. Efforts to resolve the ongoing dispute between Iran and the U.S. adds a further level of complexity to the supply/demand outlook. At market settlement Brent crude was price flat at $84.72 per barrel.
Demand from power generation has eased slightly
Demand on the UK gas system has increased day on day to 268MCM with the vast majority of demand coming from distribution offtake. Demand from power generation has eased slightly but still makes up for 30% of overall demand. The system is finely balanced at the moment with a surplus of just 1MCM. Just over 38MCM of supply is coming from LNG sources. The gas market has extended gains from yesterday as contracts at the front of the curve open with strong gains. Gas contracts for Winter delivery are up by between 12.00p and 14.00p per therm in early trading. Summer 2022 is less impacted but is up by 2.05p at this stage. Brent crude is marked down by $1.55 at $83.17 a barrel.