Gas fundamentals were comfortable yesterday
Gas fundamentals were comfortable yesterday as warm weather continued and gas demand operated at 250MCM and below the seasonal norm. The system ran with a small surplus during the day despite a reduction in LNG send out to below 90MCM. There was ample gas supply and strong nominations through the interconnector as the TTF continued to trade with a premium to the UK NBP. There are a number of key contracts expiring this week, April, Q2 & Summer 2022, and as ever this provided some short-term support to the gas market. Price initially opened softer, but premium built as more trades went through. The front month April contract was heavily traded and gained by 8.00p on the day to settle at 242.50p/therm.
The front added £10.25 to close at £220.25/MWh
The forecast for wind generation improved on Monday with expectations that output would be back up to 11GW during this week. the minimum supply margin widened a touch, and this brought some pressure on day ahead baseload power contracts. Baseload power for today settled at £207.00/MWh, down by £3.75. Gas led gains fed into baseload power futures with near term contracts adding premium. As with their gas equivalents a number of key contracts will expire this week, and this usually gives the market some support. The front added £10.25 to close at £220.25/MWh.
Crude oil markets traded in negative territory
Crude oil markets traded in negative territory for all the session on Monday and was hit with in a significant sell off in the afternoon session when considerable premium was lost. The selloff appeared to be prompted as a result of the resurgences of Covid 19 cases in many countries and in particular by the news that Shanghai, a city of 25 million people, was heading into a lock down to counter the rise of covid cases. At one stage Brent crude was down by nearly ten dollars but eventually settled not far off this low point at $112.59 a barrel. Upside risk remains as talks on a ceasefire in Ukraine stall and no further update on the Iran nuclear deal.
UK gas markets have gapped up this morning
UK gas markets have gapped up this morning with significant premium being added to contracts. The front month and the other component months of Q2 2022 have added in excess of 25.00p in early trading. The Summer 2022 contract is yet to trade but price pressure here is similar. The front month, Q2 and Summer 2022 contracts are due to expire in coming days and this event tends to create some price pressure. Adding to the mix is the refusal of EU counties to pay for Russian gas in roubles as demanded by Putin. Gas fundamentals have not changed and remain stable. Crude oil markets are still trending lower with prices down for Brent down by 24 cents.