Gas market focus is on Russian gas supply to Germany

Gas demand in the UK fell on Friday

Forecast milder weather and lower heating demand this week helped ease prompt gas prices on Friday.  Gas demand in the UK fell on Friday as wind generation increased and prices for the week ahead and balance-of-month shed 6.00p.  The day ahead for today was up 2.00p however as wind generation is forecast to fall off from weekend highs of 13GW.  Friday saw an increase in Russian gas supply to Germany and the market is looking to a further step up on Monday if Gazprom are to fulfil their commitment to increase storage injection rates.  NBP contracts for the current winter months gained an average of 2.00p on the day and were up by an average of 24.00p week-on-week.

Baseload futures tracked gas prices

Baseload futures tracked gas prices on the near curve higher on Friday with the front month recording the biggest gain of £4.25/MWh.  Seasonal contracts for Summer 22 and beyond generally eased with falling gas and emissions prices further out the curve.  Summer and Winter 22 contracts remained above £100.00/MWh however. The day ahead baseload contract eased but week ahead for this week gained slightly as wind generation is forecast to fall off from weekend highs of 13GW.  The day ahead price for today is 25% up on last Monday’s equivalent.

 Crude oil prices rebounded

Crude oil prices rebounded as OPEC+ agreed to limit production increases to previously stated levels and resist calls for further increase, ignoring pleas from the U.S. to increase output.  The recovery in demand along with OPEC adhering to their schedule of a gradual pick up in production has contributed to the recent rebound in crude oil prices and the cartel is keen to ensure that this price progression is not undermined by over-supply.  Brent crude gained $2.20 on Friday but remained $1.64 lower week-on-week while West Texas Intermediate gained $2.74 a barrel on the day.  Following 4 days of modest gains, EU ETS unit prices slipped back a little on Friday.

Wind generation has plummeted

Gas market focus is on Russian gas supply to Germany today.  Supply will need to step up substantially if Gazprom are to deliver on their intention to begin replenishing storage in Germany and Austria.  So far this morning, there has been no evidence of increased supply and Western European markets have moved higher in early trading.  Wind generation has plummeted from 12GW to just 4GW overnight leading to increased gas–fired power demand, but modest UK heating demand is keeping overall demand some 20MCM below the seasonal norm this morning.  On the oil market, Brent crude has gained just over a dollar.