Uncertainty regarding flows via the Nord Stream1 pipeline

UK gas market extended losses for the second day in a row

The UK gas market extended losses for the second day in a row as contracts gave up more of the premium that had been added earlier in the week. There was not one single factor which caused the selloff, but it was clear the reaction of the market to recent supply side risks had been overblown. Near term gas fundamentals remain broadly positive although upside risk remains and not all the recently added premium has fallen out of the market. Both the front month and August contracts shed more than 31.00p while Winter 2022 declined by 26.88p to close at 289.97p.  Prompt gas prices were also impacted with the Spot and day ahead contracts shedding 48.00p and 56.00p.

GB baseload futures fell on Friday

GB baseload futures fell on Friday in line with the movement on the broader energy complex.  Gas contracts gave up some of the recently added premium while the crude oil market moved to a three-week low.  EUA carbon contract also went lower by €1.00 as allowances settled in a range of €81.93 to €90.63 per tonne. Day ahead baseload power prices came under some pressure on Friday as wind generation was revised upwards with output expected to increase to 8.25GW. The day ahead contract declined by £21.00 while the weekend was prices at £120.00/MWh.

 Brent crude finished at a three-week low

The gain in crude oil markets in the previous session proved to be a falsie dawn as a significant sell off on oil contracts occurred during Friday’s session. New worries on potential demand destruction emerged to put a brake on the market. There is no doubt the Biden administration in the US in coming under increasing pressure to deal with soaring gas prices with the price at the pump in the US hitting a new high $5.016/litre, well above the traditional psychological price point of $4.00. Fears of an impending global recession as also feeding into the mix with many economies struggling to deal with soaring inflation. Brent crude finished at a three-week low of $113.12 a barrel, down by $6.69.

The gas market is pushing higher this morning

The gas market is pushing higher this morning as it seeks to recover the premium lost during Friday’s session.  The front month July contract is priced at 220.05p up by 18.25p from Fridays close and at the high point of its traded range. August is the only other contract that has traded so far at it has posted a gain of 15.95p in early trading.  There is considerable uncertainty regarding flows via the Nord Stream1 pipeline and this continues to have a negative impact on sentiment.  UK gas demand is forecast at 218MCM for today and the system is quite comfortable although prompt prices have ignored this and are up by over 60.00p from Friday.  

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