Gas prices recorded biggest ever day-on-day movement

Prices for Q1 22 shed over 100.00p

Near futures gas prices recorded their biggest ever day-on-day movement at the NBP on Thursday.  Prices for Q1 22 shed over 100.00p against a backdrop of easing demand and some lowering of tensions on the Russia-Ukraine border.  While military build-up has been halted, commercial tensions have ramped up with Ukraine accusing Gazprom of abusing its dominant market position in an official complaint to the EU Commission.  On the supply side, above normal temperatures, forecast to run into January, and a large number of LNG deliveries due to arrive at UK terminals over the next 2 weeks, helped take a large slice off the recently accumulated premium.

GB power market mirrored the decline in gas prices

The GB power market mirrored the decline in gas prices yesterday with massive losses on near futures contracts.  The front month tanked, shedding £189 but still remains at £350/MWh.  The full Q1 22 contract was down by £130/MWh, helped by a slightly better supply outlook and falling carbon prices. Movement on the day ahead contract was relatively minor but the week ahead fell by £70.00/MWh on forecast mild weather and low demand.  Wind generation increased to 8GW over the course of the day yesterday and supply margins are forecast to increase for the rest of the month.

 Crude oil prices rose for a third consecutive day

Crude oil prices rose for a third consecutive day on Thursday with Brent gaining $1.56 to settle at $76.85.  The cumulative gain over the 3 days is over $5.00 a barrel and is largely driven by optimism that the Omicron variant of Covid is less severe than previous strains and that existing vaccines are effective against it.  In further news on this, Merck and Pfizer have received FDA approval for their anti-viral medication which is hoped will reduce the level of serious illness if infected.  Carbon prices fell for a fourth day running with EU ETS unit prices shedding an average of €3.30 per tonne.

Demand on the GB gas system is lower today

As commercial activity winds down for the holiday period and temperatures rise above normal for the time of year, demand on the GB gas system is lower today.  The system is forecast 25MCM long against demand of just 258MCM.  Wind generation has fallen to 5GW but with overall power demand at just 36GW, supply margins are comfortable.  The slide in near futures gas prices continues with the front month down by 61.10p and Q1 by 57.30p.  Prices further along the curve are moving lower also with the Summer 22 contract down by 57.50p.  Brent crude has shed 65 cents to currently trade at $76.20.    

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