EU announce plans for a phased ban on Russian oil imports

04 May 2022

The front month June contract finished lower

Near curve products opened the session in negative territory, with the new front month June contract opening over 9.00p per therm down before scraping back losses throughout the day. Other contracts had a similar journey as losses were pared throughout the day. Reports that the EU was on the brink of imposing a full oil ban on Russia obscured the other key announcement that the EU has already made arrangement to secure of 75% of its Russian gas requirement from other sources. The market was quick to welcome this news and prices began their downward trajectory once again in the afternoon session. The front month June contract finished lower by 7.51p at 156.17p with remaining contracts down by just over 2.00p.

 GB baseload futures lacked any clear direction yesterday as prices went

GB baseload futures lacked any clear direction yesterday as prices went both ways.  The market was quite illiquid with few trades going through.  the front month June contract declined by £3.80as it settled at £168.50/MW.  Other Summer delivering contracts posted gains that averaged £2.00. An increase in EUA carbon costs was one of the main drivers on the curve with all carbon contracts adding €2.00/tonne.  The day ahead baseload power contract firmed a touch in line with higher gas and tighter system.  Wind generation remained low at just 4GW.  

Crude oil markets broke a four session winning streak

Even though it appeared certain that the EU would move to ban Russian oil the market went lower following multiple sessions of gains.  The EU is expected to announce a ban although it is expected that it will not be immediate and could take six months to fully implement across the group.   However upwards momentum was curtailed by demand concerns surrounding prolonged Covid lockdowns in China.  Coronavirus cases continue to rise as do concerns around future demand for oil.  Recent data from China shows factory activity in the world’s second largest economy has contracted for a second consecutive month. At market settlement Brent crude was marked down by $2.61 at $104.97 a barrel.

Brent crude has quickly reversed all of yesterday’s losses

In a well signalled move, the EU has announced a sixth round of sanctions on Russia. Included in this latest package is a complete ban on Russian oil. As always, the devil is in the detail and the move will be implemented over six months with some member states given additional time to comply. It is not surprising the market has given a negative reaction to the move and markets are trending up strongly this morning. Gas prices on the UK NBP curve are up by between 13.00p & 15.00p for those contracts that have traded. Brent crude has quickly reversed all of yesterday’s losses and the July contract is up by $3.29 at $108.26 a barrel.
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