Downward trajectory continued throughout the session
The UK gas futures market opened softer on Wednesday, shedding late gains made in the previous session. The market appeared to reconsider the impact of Ukraine suspending the flow of Russian gas through one of its transit points. Downward trajectory continued throughout the session, with the front month eventually settling at 139.74 pence per therm, down 6.03p from the previous day. Contracts past the front month ended the session down 5.62p per therm lower on average. A premium of over 95.00 pence between the prompt and front month contract encouraged further injections into British storage during the session and could be a signal for future pricing.
GB baseload power futures firmed on Wednesday
GB baseload power futures firmed on Wednesday despite falls in UK gas prices. Prices moved higher with support coming from the EUA carbon market and firmer spark spreads. Movement was contained to just over a £1.00 for contracts out to Q3 2022 while it was mixed for contracts beyond that point. GB baseload prompt contracts firmed a touch as the minimum supply margin tightened on the day. Wind generation is expected to increase to 8GW in coming days and days ahead prices should remain stable. The contract closed at £76.45/MWh, up by £6.35.
Brent oil front month settled $5.17 up yesterday
After two consecutive days of losses, Brent oil front month settled $5.17 up yesterday to close at $107.63. The front month June contract opened relatively flat at $101.05 a barrel, however as the day progressed the contract gained momentum. The Brent crude market found support in positive economic news from China, who’s factory-gate inflation has eased to a one year low and the latest Covid data indicates a drop in cases. Brent prices depend heavily on China, the world’s second highest consumer of oil. A 75MCM drop in Russian gas flows to Europe on Wednesday also fed into the oil market, as the focus once again shifted to the potential for a complete EU wide ban on Russian oil.
Gas prices in the UK have gapped up this morning
Gas prices in the UK have gapped up this morning by over 20.00p as the focus returns to the halting of gas supplies across Ukraine. The Russian gas operator Gazprom has announced that it is technologically impossible to shift all volumes to new routes. This has clearly spooked the market and the front month is up by 25.76p at 165.50p. Winter 2022 has also been impacted with prices up by 24.18p at 258.00p. Forecast demand in the UK is coming in at 231MCM with over 90MCM of this being exported via the various interconnectors to continental Europe. The system is running short by 9MCM, and prompt spot price is up by 36.95p per therm.