Situation in Ukraine still provided a potential upside for crude

 The sell off on the UK NBP gas market continued for a second session

The sell off on the UK NBP gas market continued for a second session in a row and considerable premium was driven from contracts.  The market opened with contract down by 10.00p initially but this quickly grew to 20.00p as the premium added over the course of the previous began to disappear.  The new front month March contract fell to a low of 177.10p before finally settling at 180.79p per therm, 22.29p lower than the previous close.  The front Summer had a similar journey and settled 22.19p lower at 174.72p, bringing the two-day loss to just under 40.00p.  Gas supply/demand fundamentals remain broadly positive with strong supply giving the system a surplus of 12MCM throughout.

Baseload futures continued to correct lower during yesterday’s market

Baseload futures continued to correct lower during yesterday’s market as the power curve followed the NBP gas marker lower.  Significant premium of over £17.00/MWh came out of contracts out to Winter 2022 as some supply issues eased and conditions for increased renewable generation turned favourable.  Wind generation levels are expected to outturn above 12GW mark in the coming days as weather conditions turn stormy.   Day ahead baseload power fell to £170.00/MWh as a result, its lowest point so far this year.

 April Brent crude contract assumed front month status

The April Brent crude contract assumed front month status today and traded rangebound for much of the session.  While the March contract did expire above the $90 a barrel mark the April failed to break through this important psychological barrier on its full day of trading.  The contract peaked at $89.62 a barrel and then moved to a low point $88.72 as the market traded less than a dollar range.   Little has changed on the fundamental side and the situation in Ukraine still provided a potential upside for crude.  At market settlement the Brent crude contract for April delivery was priced at $89.09 a barrel while the WTI contract settled at $87.80.

The gas market has opened with a relatively modest bounce

Following yesterday’s heavy losses, the gas market has opened with a relatively modest bounce with the front two months up by 5.00p per therm. The March contract is trading at 186.00p per therm with April priced at 182.00p.  The front Summer has also opened stronger at 182.69p but current bid/offer spreads for this period remain relatively wide.  Forecast gas demand for today is set at 285MCM which is 10MCM ahead of the figure from yesterday. That said, the system is once again well supplied with a surplus of 11MCM present as the Langeled pipeline continues to deliver 82MCM into the UK.  Crude oil markets are currently subdued with Brent trading at $89.33 per barrel.  

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