The near curve and prompt gas contracts ramped up

More uncertainty on Nord Stream 2 drive prices higher

The near curve and prompt gas contracts ramped up on Tuesday as forecasts for low wind later in the week coupled with more uncertainty on Nord Stream 2 to drive prices higher. Concerns were increased as the ongoing tension on the Russia-Ukraine border could delay the certification of the new Nord Stream 2 pipeline which connects the Russian supply directly with Germany via the Baltic Sea. The January and February futures contracts settled at new record highs, closing at 323.40p and 323.90p while the spot and day ahead products also rose above the 300.00p mark yesterday.  Relief from falling carbon EUAs and lower crude oil prices pressured longer curve contracts which closed around 1.50p down.

Carbon EUAs saw a further decline yesterday

The GB baseload power market was conflicted on Tuesday as lower carbon EUAs curbed gains at the front of the curve.  The sharp increases to the near months on the NBP gas curve were largely cancelled out by the movement of carbon EUAs which saw a further 2.4% decline yesterday.  The spot price settled down by €2.00 to €80.01 per tonne. With wind generation expected to fall from 9.9GW on Tuesday, baseload for the day ahead settled over £5.00/GWh higher yesterday. Wind generation is to drop off closer to the weekend which would see supply margins tighten on Thursday and Friday.

Reduced global oil demand forecast for 2022

The crude oil markets recorded a second day of declines on Tuesday as bearish sentiment from the Omicron variant weighed while the IEA lowered its demand outlook for 2022.  The World Health Organization said on Tuesday that the latest coronavirus strain is spreading at an unprecedented rate. With more nations increasing travel restrictions the International Energy Agency reduced its global oil demand forecast for 2022 by 100,000 barrels per day. Brent closed 69 cents down at $73.70 a barrel while West Texas Intermediate settled at $70.73 a barrel down 56 cents.  

The GB gas system has opened with a wide surplus

The GB gas system has opened with a wide surplus as demand for today is just 268MCM which is over 12.5% down on the seasonal norm.  Trading on the prompt has been sluggish but the day ahead has opened over 4.00p down, to last trade at 309.00p.  Near months on the NBP curve are between 14.00p and 23.00p down although trading is unsettled.  The summer has also moved 14.81p lower while futures past this have yet to open.  Crude oil prices have continued to ease this morning with both benchmarks around 80 cents a barrel lower.