Gas prices declined steadily throughout the day yesterday

 Two-session losing streak for UK NBP gas prices was broken on Thursday

The two-session losing streak for UK NBP gas prices was broken on Thursday as the market attempted to recover the recent loss of premium.  The front month contract opened higher by some 6.00p and peaked at 180.66p per therm at one stage, nearly 14.00p higher than the previous close.  There were few takers at this price level and prices declined steadily throughout the day.  At one stage the market was just 2.00p above the previous close but in a late rally, prices out to Winter 2022 finished up by just under 12.00p on average.  There is no doubt that that despite recent positive developments on the Ukrainian border the market is still on edge and geopolitical risks remain.

 The GB power market edged higher over the course of the day

The GB power market edged higher over the course of the day yesterday as geopolitical tensions continues to drive sentiment.  On the more fundamental side all the elements were broadly positive as a high level of wind generation kept the system margin wide.  Surplus generation capacity grew to 6.4GW and was expected to maintain that level in coming weeks.  On the futures market baseload power contracts out to Winter 2022 added £8.00/MWh on average.  Remaining period were less impacted with some declines recorded.

Ongoing tensions on the border between Ukraine and Russia has provided support for oil market

For the last number of sessions there has been a competition between different drivers to provide a direction for crude oil market.  The ongoing tensions on the border between Ukraine and Russia has provided support for oil market as risk premium is added as tensions increase.  On the other side the prospect of the US and Iran reaching agreement on the latter’s nuclear ambitions has provided a downside.  Iran oil’s production capacity is circa. 2 million barrels a day and with 1 million being exported to China, the potential for an additional million barrels coming on the open market would keep prices in check. This was the main driver yesterday as Brent shed $1.81 to close at $93.00.

The bounce in the gas market yesterday has been short-lived

The bounce in the gas market yesterday has been short-lived and prices are in retreat this morning.  The front month March contract opened at 171.67p and is currently trading at 172.00p per therm, 7.67p down from last night’s close.  The front Summer is also under pressure as it trades at 171.00p, down by 7.55p.  Forecast demand on the UK gas system is coming in at 264MCM which is well below the seasonal norm.  The arrival of storm Eunice has made condition for wind generation more favourable, and this has displaced demand from conventional gas generation.  The gas system is currently 17MCM oversupplied.   Crude oil is priced at $90.71, down by $2.22.

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