There is no doubt that volatility remains a key issue for the market
The front month February contract opened on Friday at 239.00p and firmed to 251.00p in the first hour of trading. Prices eased thereafter but still held on to 15.00p to 10.00p of premium over the previous settlement. The selloff happened in the later part of the session where February fell to a low of 201.00p before settling at 214.96p, down by 20.24p. Other contracts across the curve experienced a similar journey as the market settled for the first week of trading for 2022 and the gains of the previous two sessions were reversed. There is no doubt that volatility remains a key issue for the market but in this instance the downward correction was a welcome outcome.
The GB baseload power market retreated on Friday
The GB baseload power market retreated on Friday as a big sell off in the gas market provided direction. The front month February contract was the most impacted with £32.50 of premium coming out as the price fell to £245.00/MWh. Other contract for near term delivery also went lower for the first time in 2022. On average over £11.00 of premium came out of contracts out to Winter 2022. Baseload for the day ahead rallied by £8.00/MWh from the previous day, as wind generation out turned lower than expected. Wind was contributing double digit figures in the past week, but this is expected to drop to 7GW on average for this week.
Crude oil markets threaded water for the most part on Friday
Crude oil markets threaded water for the most part on Friday with the market only moving marginally lower over the course of the day. The gains added in the previous sessions remained largely intact as the fundamentals driving the market stayed in place. The troubles in Kazakhstan continue to support the oil market along with the supply constraints in Libya. Data released by OPEC revealed that the Group failed to fully fulfill the increased quota allocated for December and it would appear that the march of the Omicron variant is to some extent tempering demand. At market close the Brent crude contract was priced at $81.75 a barrel, down by 24 cents but up by $2.43 over the week.
The gas market opened softer this morning
The gas market opened softer this morning with losses at the front of the curve although in the last hour or so contracts have begun to recover some of this premium. The front month February traded to a low of 206.00p but is now priced at 216.00p just a penny above Friday’s close. The Summer contract last traded 9.00p lower than Friday but latest bid/offer spreads suggest that this premium will be recovered in the next trade. Gas demand over the weekend was lower than in the previous days with milder temperature impacting. Forecast demand is at 335MCM and the system is operating with a small deficit of 8MCM. Crude oil markets are trading flat to Friday’s close.
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