Brent crude shrugged off recession fears during Thursday’s session

Prompt and near-term gas contracts recovered the majority of the losses

Prompt and near-term gas contracts recovered the majority of the losses from the previous session as prices rose from the outset yesterday.  The front month August contract easily retraced the previous day’s losses and surged further ahead as the contract climbed to 328.50p per therm at one stage.  Some of this premium fell out late on and August settled at 298.45p, up by 22.08p from the previous close. The gas prompt went higher on opening and both the spot and day ahead contracts adding 43.85p and 41.55p, respectively. Across the remainder of the forward curve contracts continued their upward trajectory as the market remained fixated on future potential supply risks that could curb gas supplies for the coming Winter.

GB baseload futures posted significant gains

GB baseload futures posted significant gains during the market yesterday as contracts followed the broader energy complex higher.  Large gains on the UK NBP fed directly into the power market with higher crude oil and EUA carbon prices also providing support. Gains in the EUA carbon market averaged just under a €1.00 with contracts now being priced between €84.10 to €93.27 per tonne.  Across the futures curve baseload power posted gains of £27.00/MWh on average. Baseload for the day ahead recovered recent losses and added £42.00 to close at £230.40/MWh.

Market turned its attention to a tight supply outlook

Brent crude shrugged off recession fears during Thursday’s session as the market turned its attention to a tight supply outlook. After a two-day decline brent crude front month settled at $104.65 a barrel, $3.96 up from the previous session. Russian supply disruptions are on the horizon as the Caspian Pipeline Consortium was ordered by the Russian courts to suspend activities for 30 days. The 1,500 km long pipeline flows Russian oil via Kazakhstan to the Black Sea and accounts for 1% of the global oil trade. The tight supply sentiment found additional support from China, as Beijing is considering fast tracking local bond sales, leading to a $220 billion stimulus package to restore economic growth in the world’s second largest oil consuming nation.

The UK gas market is finely balanced this morning

Early losses of 12.00p to 15.00p on the front two months have been pared back as trading ramps up this morning. The front month is priced at 296.65p, just 1.67p below last night’s close while Winter 2022 coming in at 450.00p/therm. Prompt gas prices are not far off where they finished yesterday although there have been precious few trades going through thus far. The UK gas market is finely balanced this morning with UK demand falling to 211MCM in advance of the weekend. Forecasts for higher temperatures over the weekend could see greater demand but prices for the weekend are currently quoted at 190.00p/therm.  Crude oil markets are trading slightly lower.  

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