Gas market is braced for disruption
Energy markets across Europe have long since decoupled from fundamental drivers and are now entirely focused on the war that Russia is waging in Ukraine. Flows of gas from Russia to Western Europe have increased in recent days but gas market is braced for disruption and risk premium continues to build in all the major European gas hubs. The UK NBP gas market has been defined by extreme volatility, wide bid/offer spreads and wild swings between the highs and lows. The spread on the front month April contract came in at 53.00p as the price moved from a low of 243.00p to a high of 296.00p. All contracts finished at the upper end of the scale with Summer 2022 settling at 288.25p, up by 50.60p.
Carbon EUAs suffered their largest one day fall
GB baseload power contracts surged higher yesterday following similar moves on gas contracts. Near curve contracts settled between £33.00/MWh and £35.00/MWh higher in a highly volatile session. Baseload for the day ahead fell by £33.75/MWh on the back improving fundamentals but this had no impact on the curve. Carbon EUAs suffered their largest one day fall as a huge sell off decimated the carbon market. Large volumes of allowances were traded in a spread of just under €18.00. Spot EUAs fell to a low of €66.00 per tonne and eventually closed at €69.41 per tonne, down by €12.85 from the previous close.
The crude oil market has been convulsed by the events in the Ukraine
The May contract assumed front month status yesterday and continued where April left off as risk premium built up. The invasion of Ukraine by Russia has caused significant political and economic shock waves across the globe. The crude oil market has been convulsed by the events in the Ukraine and the behavior of Russia which provides 10% of total crude oil demand. Economic sanctions on Russia continue to bite and the decision by Canada to suspend purchasing supplies of crude oil from Russia is perhaps a pointer of what is to come from the rest of the free world. At market settlement the Brent crude contract for April delivery was priced at $104.97, up by $7.00 from the previous close.
There is nothing else driving the market other than the worsening war in Ukraine
The UK gas market has opened with another surge in prices with the front month peaking at a new record high of 463.83p per therm which is an eye-watering gain of 173.88p from last night’s close. The gas market has eased off this high in the last hour although prices for some periods are still up by over 95.00p per therm from the previous settlement. There is nothing else driving the market other than the worsening war in Ukraine and the prospect of Russia being locked out of energy markets across the globe. Crude oil markets also remain volatile with gains of $5.39 on the front month. The selloff in carbon markets continues with contracts down by €6.00 per tonne.