The Nord Stream 1 pipeline made its return from maintenance

The UK gas market extended strong gains for the second session in a row

The UK gas market extended strong gains for the second session in a row as the market continued to fret about the return of the Nord Stream 1 pipeline from annual maintenance.  The gains came despite the fact that Vladmir Putin had indicated that flows would resume but also warned that other issues could arise with the pipeline if key replacement components remained under sanction. Once again much of the focus was on the front of the curve where both the August and September contracts posted gains of over 50.00p and 31.00p respectively. In another key development the EU commission announced a plan to reduce demand by 15% across the EU.  This requirement will be voluntary but other conditions have yet to be decided.

Day ahead baseload power prices surged to their highest point since March of this year

Day ahead baseload power prices surged to their highest point since March of this year as gas led gains and firmer spark spreads pulled the contract up by £97.00 to close ay £340.00/MWh.  The increase in spark spread was as a result of falling renewable generation and the requirement for more expensive generation to balance the system. The stronger prompt and gains on the corresponding NBP gas contract led to increases in near term baseload power contracts.  The front month August contract settled at £329.50, up by £22.50 while Winter 2022 added £10.25 to close at £459.50/MWh.  

 Brent crude fell marginally during Wednesday’s session

Brent crude fell marginally during Wednesday’s session as the US Energy Information Administration posted gasoline inventories of around 3.5m barrels in excess of expectation. Contracts for delivery for the front month of September settled at $106.92 down $0.43. Libya’s National Oil Corp (NOC) confirmed on Wednesday that crude production has resumed at several oilfields following the lifting of force majeure on oil exports last week. Despite the positive news from Libya and an increase in US inventory levels, oil markets are expected to struggle as OPEC+ have little further room to increase production.  

Early trading in the gas market saw contracts push higher

The Nord Stream 1 pipeline made its return from maintenance this morning with flows recommencing at 5am. Early indications would suggest that flows are on par with the levels before the maintenance began with deliveries at 40% of overall capacity. In the UK forecast demand for today is coming in at 222MCM although the supply/demand balance has improved for recent days.  The system is delicately balanced with send exactly matching demand.  Early trading in the gas market saw contracts push higher but this premium has now begun to fall out of the market with the front month down 15.00p from its high point. Brent is priced at €102.92, down by $4.00.  

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