Gazprom’s storage in Germany disappointed the markets yesterday
The much-anticipated arrival of Russian gas for injection to Gazprom’s storage in Germany disappointed the markets yesterday with only minimal quantities flowing. Net storage volumes actually decreased yesterday as withdrawals outstripped injections and early bearish sentiment on European gas markets was softened. Near futures prices which had fallen by over 20.00p on Wednesday morning rebounded later in the day and contracts for the current winter months settled around 7.00p lower day-on-day. An early supply surplus of over 20MCM saw prompt prices tumble and, despite a later rise in demand due to falling wind generation, spot and day ahead prices finished 9.00p lower day-on-day.
GB power futures saw only modest movement on Wednesday
GB power futures saw only modest movement on Wednesday as rising carbon prices partly offset losses on the UK gas market. Early losses on the gas market were largely pared back as it became apparent that Russian deliveries to German storage sites was less than expected. The strong gains in carbon prices supported power contracts further out the curve. The day ahead baseload price fell by £50/MWh despite a forecast collapse in wind availability today. The big decrease was somewhat perplexing given the lower wind forecast and an unplanned outage on the North Sea Link which took 1.4GW of Norwegian supply to GB off-line yesterday.
The rise in U.S. stock levels took the market by surprise
Following last week’s price reversal, the gradual rise in crude oil prices earlier this week was undone yesterday. Prices fell significantly on weekly inventory data which showed U.S. stock levels rising and WTI shed $2.81 while Brent crude fell by $2.14 a barrel. The rise in U.S. stock levels took the market by surprise as a decline had been anticipated following estimates from the American Petroleum Institute on Tuesday. The price reversal was also enabled by speculation that the U.S. might dip into strategic reserves to partly offset the impact of current high market prices. A further strengthening of the dollar also helped temper oil prices yesterday.
Demand on the UK gas system is below the seasonal norm
With temperatures remaining above average, demand on the UK gas system is again below the seasonal norm today. Wind generation has fallen below 1.5GW this morning and gas-fired power generation is drawing 0ver 90MCM. The system is currently forecast 2MCM short for today but supply in picking up with increased LNG send-out. As the markets gauge the impact of Russian flows into Germany, any further price decline is on hold until significant storage injection commences. The front month NBP contract is up 1.59p in early trading and oil has also recovered some of yesterday’s loss with Brent currently market up at $83.30 a barrel.