Gas prices surged despite the UK having no reliance on Russian gas flows

Gazprom indicated that flows into Western Europe would be reduced

Gas markets across Europe continued to digest the news that flow via the Nord Stream 1 pipeline could face further disruption as Gazprom insisted that work on key turbines was not yet completed.  The Russian state gas company indicated that flows into Western Europe would be reduced further and thus disrupting plans for further injections into European storage sites.  The UK NBP gas market was not immune to these developments as gas prices surged despite the UK having no reliance on Russian gas flows.  In another development the EU commission announced thar agreement had been reached on lower gas demand by 15% between now and March 2023.  The proposals were watered down by allowing countries without physical connection to the European gas grid to opt out of the plan.

GB baseload power futures continued to move higher

GB baseload power futures continued to move higher during the session on Tuesday as huge gas gains fed into power prices. Gains in the European coal market also played a role with Rotterdam Cal’ 23 reaching a record $301.25/tonne. The Winter 2022 baseload power contract surged to over £500.00/MWh and matched gains across most European hubs. Baseload for the day ahead settled at £314.65, up by £65.00 from the previous settlement as forecasts for wind generation levels dropped to just 1.1GW for today. The EUA carbon market was relatively stable with price movement held to just above 40 cents.

Brent Crude oil shed some of the recent gains on Tuesday

Brent Crude oil shed some of the recent gains on Tuesday to end the session marginally down. Contracts for a September delivery fell $0.75 to finish at $104.40. West Texas Intermediate experiencing a greater drop of $1.74 to finish the session $94.96. The IMF dealt another blow to the outlook for global demand with reduced forecasts for the global economic growth of 3.2% for 2022, down 0.4% and 2.9% for 2023 down 0.7%.

The UK gas market is displaying significant volatility this morning

The UK gas market is displaying significant volatility this morning with risk premium continuing to flow into contracts. The front month August contract has already increased by 42.84p as it trades at 394.99p per therm. Likewise Winter 2022 continues to push upward and is priced at 525.00p/therm up by 43.01p from last night’s close. The prompt market has yet to post any trades or indeed any bid/offers but upward price pressure is inevitable. Forecast gas demand in the UK is relatively low at 201MCM and there has been a reduction in LNG send out. The system is running in balance this morning.

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