Day ahead baseload power hit a record settlement price

Early losses on the UK gas market were reversed

Better than forecast wind availability helped keep UK gas demand well below the seasonal norm on Wednesday and supply outstripped demand by over 15MCM at 0800.  The surplus dwindled to 3MCM by close of business however and early losses on the UK gas market were reversed over the course of the trading day leaving prompt and near futures contracts higher day-on-day.  The January and February contracts have now gained 36% over the past 5 days as European gas prices continue to balloon.  Tensions on the Russia-Ukraine border and delay in certifying the Nord Stream 2 pipeline are driving prices for the current winter higher but seasonal contracts for Summer and Winter 22 eased for a second day running.

Movement on the GB power futures market was limited

Movement on the GB power futures market was limited yesterday with contracts generally tracking gas price movement on the day.  Near futures continued to receive support from gas and carbon as UKA’s rose to £75 per tonne.  The market reacted to the lack of intervention by the UK ETS Authority after the December Cost Containment Mechanism was triggered. With wind generation expected to plummet to just 2 GW today, and supply margins to become even tighter, the day ahead baseload power price hit a new record settlement price of £380/MWh on Wednesday.

 The oil markets staged a late rally

The downturn in crude oil prices for the first 2 days of this week was stemmed on Wednesday with Brent crude recording a modest increase of 18 cents day-on-day.  With more nations increasing travel restrictions the International Energy Agency reduced its global oil demand forecast for 2022 by 100,000 barrels per day on Tuesday.  This led to further losses in early trading on Wednesday with Brent falling to an intra-day low of $72.50 a barrel.  The oil markets staged a late rally however as weekly U.S. inventory data released in the afternoon showed a significant decline in crude and distillate stocks in the States last week.

Demand on the GB gas system is beginning to creep up

Demand on the GB gas system is beginning to creep up in response to falling wind generation today.  Wind is supplying just 2GW of GB power this morning compared to 8GW yesterday.  Gas-fired power generation demand has risen to over 100MCM as a result.  The system remains well supplied however with a forecast supply surplus of 18MCM at 0900.  Near futures gas contracts are seeing some easing for the first time in a week but prices remain at exorbitant levels.  On the oil market, yesterday’s bullish tone arising from U.S. weekly inventory data has temporarily overridden concerns of economic downturn as a result of fresh restrictions in the face of the new Omicron variant of Covid.