All major energy hubs across Europe witnessed huge volatility

25 February 2022

UK NBP market was defined by massive intraday volatility

Thursday was not only a tumultuous and difficult day for energy markets across Europe but also for the citizens of Ukraine and its environs.  All major energy hubs across Europe witnessed huge volatility and price increases as the impact of the Russian invasion of Ukraine hit home.  The UK NBP market was defined by massive intraday volatility where prices swung by substantial amounts.  The March contract was a case in point as it traded in a range of 257.00p to 348.00p, and then fell back to 289.00p per therm while the Summer 2022 contract came off an earlier high of 345.00p per therm to last trade at 318.57p, up by 103.00p. Such was the carnage on the market that in an unprecedented move some suppliers suspended trading altogether.

The market was wracked by volatility and surging prices

The full-blown invasion of Ukraine by Russia brought the full weight of geopolitical risks on the GB baseload power market.  All fundamental drivers were set aside as the market was wracked by volatility and surging prices.  It is likely that volatility will continue for a number of days and possibly weeks as the market assesses the prospect of further disruption on exports from Europe’s biggest supplier of natural gas.  Gains on the baseload power curve averaged £44.00/MWh in a frantic session.  The prompt was similarly impacted as it added £79.00.  EUA carbon markets diverged from the energy complex and fell by 8%.

Oil contracts surged higher

Global crude oil markets on Wednesday, which finished flat, proved to be the calm before the storm as oil contracts surged higher on the news that Russia had extended in invasion of Ukraine to a full-blown assault.  While equity and stock markets tumbled the situation on energy markets was rather different as prices surged.  The Brent crude contract for April delivery easily pushed past the $100 a barrel mark and added further premium as it peaked at $105.79 a barrel. There was significant intraday volatility with prices swinging each way but by settlement crude held onto some gains and settled at $99.08, up by $2.44.  The West Texas Intermediate contract was less impacted as it closed at $91.07 increasing the spread between the two contracts to $8.01.

 All contracts shedding significant premium

The UK NBP gas market has turned sharply lower in early trading this morning with all contracts shedding significant premium in a reversal of the trend from yesterday.  The front month fell by 81.97p to a low of 240.00p and is currently priced at 259.00p, down by 62.97p from last night’s close.  Both the front Summer and Winter 2022 have shed 60.57p and 72.12p respectively.  The market remains on edge as it awaits Russia’s response to the raft of economic sanctions imposed by Western countries in response to the invasion.  Crude oil contracts have traded above the $100 mark already this morning although Brent is currently priced at $99.37 a barrel, up by 32 cents.
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