The gas market softened as the day wore on

 The front month August contract surged

UK NBP Gas contracts pushed higher during the early part of the session yesterday as risk premium continued to build. The prospect of a total shut down of gas supplies from Russia dominated the market with key contracts getting to levels that made prices unsustainable. Gazprom’s threat to reduce flows through the Nord Stream 1 pipeline became a reality at 9am yesterday as nomination dropped from 63MCM to just 44MCM.  The front month August contract surged to 399.99p per therm with September adding 48.00p in early trading.  The market softened as the day wore on with contracts finishing off their highs.  Longer dated contracts in the seasons actually went lower with Summer 2023 settling at 319.95, down by 6.28p from the previous close.  

 Large increases in UK NBP gas prices continued to pressure on  GB baseload power

Large increases in UK NBP gas prices continued to pressure the GB baseload power curve higher during yesterday’s session. in addition, widening spark spreads also played a role in bringing UK power prices to record highs. The front month August contract did pull away from its high point of the day but added £18.00 to close at £328.25/MWh. The Winter 2022 baseload contract also surged to another record high of £538.25/MWh with a spark spread element of £170.35/MWh. With wind generation operating below the seasonal norm the day ahead baseload contract added a further £29.85.  

  Brent posted gains of roughly 2% across the curve

Brent posted gains of roughly 2% across the curve in trading on Wednesday. Contracts for September delivery rose $2.22 to settle at $106.62. The U.S. benchmark, West Texas Intermediate gained $2.28 a barrel, closing at $97.26 a barrel. US crude oil and gasoline inventory data from the Energy Information Administration showed a 4.5m barrel reduction in crude oil stocks compared to the previous week. The larger than expected drawdown and increased Russian curtailment of gas supplies to Europe supported prices, outweighing concerns surrounding the global economic outlook and the impending US interest rate increase.  

Last day of trading on ICE for the August contract

It’s the last day of trading on ICE for the August contract and early trading has been focused on this contract.  August opened softer but losses were quickly pared back as the last trade for the outgoing front month was 3.62p down on yesterdays close.  Wide bid/ ask spreads are holding back trades for the spot and day ahead products on the NBP prompt, but the midpoint would suggest prices are going to open softer.  Demand on the UK gas system is 210MCM and supplies are forecast 7MCM long.  In the crude oil markets, Brent has continued to push on and is $1.89 a barrel up at $108.51 a barrel.  

Read more carbon market news in our Insights section