Gas prices beyond Q1 22 continued to rise yesterday

Gas prices on the UK NBP for the remaining winter months eased yesterday

Gas prices on the UK NBP for the remaining winter months eased yesterday as the gas system recorded a positive supply demand balance with deliveries out-stripping demand by an average of 15MCM throughout the trading day. Prices had soared on Tuesday on the back of reports that showed Russian supplies were reversed at the German-Polish boarder, pressuring already tight European reserves, and pushing up prices across Western European markets. Yesterday’s losses on the near curve were paltry compared to the previous day’s gains, and indeed, prices beyond Q1 22 continued to rise yesterday with the full calendar year 2022 settling at just over 350p.

 Surge in GB power prices was partially retraced on Wednesday

The massive surge in GB power prices seen on Tuesday was partially retraced on Wednesday with prices for Q1 22 easing by £15.00/MWh. General tightness in supply margins continues and is exacerbated by restricted French nuclear output where the February contract traded above €1,000/MWh for a time yesterday morning. The day ahead baseload contract eased again yesterday as wind generation picked up to almost 6GW. The week ahead contract also eased on forecast average temperatures, improved wind availability and additional LNG deliveries to the UK.

 Carbon prices eased on the day

A weakening U.S. dollar exchange rate against other major currencies provided some bullish momentum to the oil market on Wednesday. This was partly offset by ongoing concerns over demand due to restrictions arising from the spread of Covid-19 infection due to the Omicron variant. Weekly inventory data from the U.S. Energy Information Administration provided little concrete direction to the market as a bigger-than-expected decrease in crude stocks was countered by a bigger-than-expected rise in distillate stocks last week. Carbon prices eased on the day with EU ETS unit prices falling by an average of 60 cent per tonne.  

Demand on the GB gas system has fallen below 300MCM this morning

Demand on the GB gas system has fallen below 300MCM this morning and the system is forecast 10MCM long for today. Lower demand, improved wind availability and additional LNG deliveries by 1st January are likely to see some easing on the prompt market. Near futures contracts have opened sharply lower this morning with the front month down 65.30p in early trading. Whether this movement will be replicated further along the curve remains to be seen as no trades have yet been recorded for S 22 or beyond. Crude oil remained range-bound overnight with Brent last traded at $75.05 a barrel.  

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