Gas market continued to react to numerous supply risks

The UK gas market experienced another extraordinary day

The UK gas market experienced another extraordinary day with prices surging higher for much of the session as huge amounts of premium built up in forward contracts. The market continued to react to numerous supply risks. Gazprom indicated that flows via Nord Stream 1 could fall to zero because of a technical maintenance issue. There is a high degree of scepticism that this is in fact the case with Germany accusing Gazprom of deliberately driving up the market. The front month the contract traded up to a high of 315.07p before falling sharply through the afternoon session to a low of 218.50p, before closing the day at 233.62p, down 24.16p on yesterday’s close.

The GB baseload day ahead market settled higher on Thursday

The GB baseload day ahead market settled higher on Thursday despite supply/demand fundamentals remaining broadly positive on the day.  Wind generation continued to operate above the seasonal norm, and this was expected to continue for next week.  Day ahead settled at £181.75/MWh up by £18.50 from the previous close. Power futures carried strong gains for much of the session yesterday but the late collapse in gas prices saw power contract follow suits.  The front month July contract shed £14.35 to close at £209.60/MWh.

 Brent crude oil prices continued to slide in the early hours of trading

Brent crude oil prices continued to slide in the early hours of trading on Thursday, with the front month falling to an intraday low of $115.58 a barrel, a price not seen in over two weeks, before recovering to settling at $119.81 a barrel, up $1.30 from the previous session. Recent interest rate hikes by the Federal Reserve caused crude markets to fall but the focus has once again shifted to the supply side. The gradual emergence of some major Chinese cities from Covid lock downs have provided a bullish signal. In addition, reports of a significant reduction in Libyan oil production because of blockades of oil fields has given the market upward impetus.

 Yesterday’s late collapse did not afford any opportunity for buyers

The UK gas market has opened with some increases from last night’s close although in the last hour or so prices have begun to soften.  Yesterday’s late collapse did not afford any opportunity for buyers, and it appears that some are active this morning.  The front month July contract was priced at 255.23p/therm earlier but is currently changing hands at 241.20p, up by 7.58p from the previous settlement.  The Winter 2023 contract is yet to trade and there are no offers at present.  Forecast gas demand in the UK is relatively low at 201MCM with high renewable generation still feature.  Brent crude is up by a dollar at $120.81 a barrel.

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