UK NBP market continued to release war related premium

 At market close gas contracts out to Winter 2022 were down

The UK NBP market continued to release war related premium during the session on Monday with other fundamental factors also weighing on the curve.  As we approach the summer season the market appears to be more confident that gas supplies will remain robust as temperatures rise and LNG tankers continue to arrive in the UK.  While the ongoing invasion of Ukraine provides upside risk there is still substantial flows coming from Russia and European storage injections remain strong.  News that Germany was on the verge of concluding a long-term LNG deal with Qatar has given a further level of confidence.  At market close gas contracts out to Winter 2022 were down by just under 19.00p on average.

 GB baseload futures extended losses for a second session

GB baseload futures extended losses for a second session in a row as the power market moved lower in tandem with losses on corresponding gas contracts.  A sell off on the gas market came about as supply/demand fundamentals improved although increase in carbon and crude oil market kept a lid on losses for power. The front month April baseload contract declined by £16.50 to close at £203.50/MWh.  All other contract out to Winter were down by £13.50/MWh.  The spot price weakened by just under £30.00/MWh as demand fell on warmer temperatures and the system margin increased.

 Crude oil markets traded higher during Monday’s session

Crude oil markets traded higher during Monday’s session and extended gains for the third day in a row.  The market was reacting to the possibility of sanctions on Russia being extended to further target the energy sector.  Hopes for a ceasefire had receded somewhat as the Ukrainian authorities rejected a call from Russia to surrender arms in the besieged city of Mariupol.  The EU is actively considering joining the U.S. in an oil embargo although this could present significant difficulties for many European nations.  Prices on the market have moved significantly higher ahead of talks between Western leaders and Joe Biden aimed at hardening the West’s response.  Brent crude gained by $7.69 to close at $115.62 a barrel.

UK gas market opened weaker this morning

The UK gas market opened weaker this morning but in the last hour or so contracts have begun to firm.  This is hardly surprising given yesterday’s sell off as contracts seeking to recover premium.  Gas gains are in the order of 3.00p to 5.00p with just the front months and Summer 2022 actively trading. Gas fundamentals remain on par with yesterday with forecast demand coming in at 263MCM and the system has a small surplus of 5MCM.  The main source of supply is coming from Norway at 66% and LNG at 32%.  Crude oil markets are relatively stable this morning following yesterday’s strong gains.  Brent crude is priced at $114.71, down by $0.91 from last night’s close.

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