Brent set a new seven-year high yesterday

23 February 2022

 The energy markets opened higher

The energy markets opened higher in response to reports that the Russian President ordered troops into the two breakaway regions in east Ukraine yesterday.  Near curve contracts opened with gains of up to 15.00p and these gains were extended into the session as the front month contract, March, peaked at 196.88p.  Futures did ease back later in the session and March settled 17.46p higher at 190.99p.  Prompt prices closed between 12.00p and 18.50p higher yesterday with fresh forecasts for a drop in temperatures adding to gains on the weekend contract.  Report emerged that Germany put a hold on the certification process of Nord Stream 2 but much of this pricing risk has already been factored into gas prices.

  Baseload power futures rose by over 6.5% yesterday

Baseload power futures rose by over 6.5% yesterday as the market tracked movements in NBP futures prices after Russian troops moved into Ukraine’s Luhansk and Donetsk regions. News also emerged during the afternoon that Germany would hold Nord Stream 2. The lead month, March, settled £10.75/MWh higher at £180.00/MWh. Wind generation topped the UK power stack on Tuesday with supplies of over 13.5GW which made up over 38.0% of demand on the day.  Power prompt prices reacted to the higher gas prompt though and the day ahead settled £7.44/MWh higher at £161.22/MWh.

The global benchmark peaked early in the session

Brent set a new seven-year high yesterday, closing at $96.84 a barrel and gaining $1.45 a barrel on the day.  The global benchmark peaked early in the session and looked set to burst through the $100 a barrel marker but fell short at $99.50 a barrel.  Crude oil prices were responding to the escalation of tensions between Russia and the West when the market is already in tight supply.  Talks between the U.S. and Iran are still ongoing, but it is believed progress is being made on Iran’s nuclear deal and there are hopes that increased output from Iran could counter some of the upside to prices.

NBP futures have continued to move higher

GB gas demand for the day is pitched at 258MCM and supplies are long by over 20MCM.  Trading on the prompt market is thin with just the day ahead product seeing action and was last traded at 195.00p, up 10.00p on yesterday’s close.  NBP futures have continued to move higher this morning with contracts that have traded showing a 10.00p increase on Tuesday as the Russian/ Ukraine conflict continues to cause concerns.  In contrast, the crude oil markets are edging lower with Brent 74 cents a barrel down while WTI has declined by 78 cent a barrel.
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