Early gains were soon eroded
The UK gas market made a valiant effort to push higher in early trading on Wednesday, but these early gains were soon eroded as more positive news emerged regarding the talks between Ukraine and Russia. Both sides were separately reporting that progress had been made and that the possibility of a ceasefire was becoming a reality. On the ground however the attacks continue, and the situation remains volatile. Gas contracts across the curve were sold off with the loss of premium increasing as the day wore on. The front month April contract traded to a high of 285.00p/therm and low of 238.52p/therm before closing near the low of 240.81p. Both Summer 2022 and Winter 2022 shed 31.24 and 22.27p, respectively.
GB baseload power contracts reversed early gains
GB baseload power contracts reversed early gains and followed the sell off on the UK NBP curve. All contracts out to Winter 2022 went significantly lower with losses averaging £22.80/MWh. The Summer 2022 baseload power contract settled at £217.50/MWh while Winter 2022 baseload fell to £212.50/MWh, down by £12.00. Baseload for the day ahead was supported by the forecast of lower wind generation in coming days with declining French nuclear capacity a factor. However, gas losses were the deciding factor with prompt power settling at £230.00/MWh, down £74.20.
The Brent crude contract for April delivery briefly traded up to $103.00
The Brent crude contract for April delivery briefly traded up to $103.00 in early trading but these gains were reversed with ease as the contract fell back below the $100.00 a barrel mark. The prospect of increased supply from Iran improved as in a surprise move a UK citizen was released from custody in that country which was seen a move to improve relations between Iran and the West. An easing of Western sanctions on Iran would potentially release a further 1 million barrels of crude onto the open market. On the demand side it is now looking increasingly likely the Federal Reserve will move to increase interest rate which could temper demand in the world’s largest consumer of oil.
The market has turned weaker in the last 30 minutes
Trading on the UK gas market has been particularly slow to get started today with few trades going through. Those that have are concentrated at the front of the curve and were changing hands 10.00p above last night’s close. The market has turned weaker in the last 30 minutes or so and bid offer spreads would suggest that premium is coming out of contracts. Demand on the UK gas system has picked up on yesterday’s level as wind generation has reduced overnight. Overall demand remains is forecast at 257MCMN with 85% of supply coming from Norwegian and LNG sources. Oil prices have firmed overnight with Brent priced at $102.01, up $3.99.