Gas markets across Europe remain on edge

16 June 2022

The UK NBP extended significant gains

The UK NBP extended significant gains for third session out of the last four as new supply developments increased the risk for future gas supply.  The market continues to digest the news that the Freeport LNG terminal will not return to full capacity for three months and the reduction of nearly 55MCM of flows via the Nord Stream 1 pipeline.  The market was further rocked by news that nomination by Gazprom into to Italy had reduced by 15%.  Gas markets have been on edge for some time now and the combination of all this negative news saw contracts surge higher.  The front month July contract added 61.23p/therm to settle at 257.78p having traded higher still earlier in the session.

 GB baseload futures posted significant gains

GB baseload futures posted significant gains yesterday as power contracts followed a surging gas market higher.  Reduced flows through Nord Stream 1 and a drop in deliveries from Gazprom into Italy caused huge volatility on the market.  The front month July baseload power contract added £33.45/MWh to close at £223.95/MWh while other contracts out to Winter 2022 added £28.28/MWh on average.  Price increases were also a feature on the prompt power market, but gains were much less.  The day ahead contract settled at £181.75/MWh and continues to be priced at a significant discount to the front month

Brent crude prices eased on Wednesday

Brent crude prices eased on Wednesday as the market responded to the largest US interest rate hike by the Federal Reserve since 1994. The market was on an upward trajectory before the announcement, peaking at $121.88 a barrel before climbing back down to close at $118.51 a barrel. The price differential between the two main benchmark crudes remains tight as WTI front month settled at $117.31, down $3.62 from the previous settlement. Further downward pressure arose from a 100,000 barrel per day increase in US crude productions coupled with the market continuing to grapple with the possibility of a global recession.

Prices surging higher once again

The gas market has continued this morning where it let off yesterday with prices surging higher once again.  Overnight news that flows via Nord Stream 1 had been reduced even further has kept gas markets across Europe on edge.  The UK NBP market has posted significant gains on opening and while prices have shed some of this early premium, but contracts are still up by over 20.00p/therm this morning.  Wide bid/offer spreads are another feature of the market this morning with near term contracts most impacted. The UK gas market is operating in balance and despite the recent LNG issues seven new tankers are due in the coming weeks.
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