Explosion at US LNG terminal lifts NBP near curve

10 June 2022

Strong upward pressure on gas contracts for summer delivery

European markets opened markedly higher on reports of an explosion at one of the largest U.S. LNG plants. The terminal in Texas accounts for 20% of US LNG production and could be restricted for three weeks. The news resulted in significant upward pressure on UK NBP contracts for Summer delivery as healthy LNG shipments that have helped soften prices on the near curve by keeping the system well supplied. In contrast, the gas prompt fell sharply yesterday with the spot and day ahead contracts settling at 13.40p/therm and 10.00p/therm respectively. An interruption to UK exports via the Bacton-Zeebrugge pipeline kept significant amount of gas stranded in the UK

GB baseload power futures pushed higher on Thursday

GB baseload day ahead contracts went in the opposite direction to the futures market as weak gas prompt prices provided direction. Prompt power for today fell to £116.00/MWh and trading at a significant discount to the front month which settled at £162.50/MWh, up by £12.50.  The day ahead baseload power index for June is trending at £135.15/MWh which is well below where the June contract settled at £171.00/MWh. The uplift on baseload power futures was caused by the large increase in UK NBP gas contracts which in turn were responding to the incident at the LNG terminal in Texas.

Oil prices eased marginally yesterday

Crude oil markets broke a four session winning streak during yesterday’s market as the contracts traded mostly rangebound following multiple sessions of gains. The traded range was just over a dollar with the high point coming at $124.10 and the low of $122.50. At market settlement the Brent crude contract was not too far off the previous close as it settled at $122.89 a barrel. The West Texas Intermediate contract also displayed a similar dynamic to Brent as it settled at $121.51 a barrel. Crude oil markets have totally ignored the explosion at the Texas LNG facility and remain focused on a myriad of other supply/demand issues across the globe.

UK prompt prices reaming depressed this morning

The UK NBP market has opened weaker this morning and some of the premium added because of explosion at LNG terminal Texas is beginning to be released. As of this morning there is no further news on the extent of the damage at the terminal or indeed on the duration of the outage. While an investigation has begun the operator at the Freeport terminal has indicated that no further information will be forthcoming.  UK prompt prices remain significantly depressed this morning with the spot trading at 17.00p/therm.  Crude oil prices are flat to last night’s close as are EUA carbon contracts.
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