Restrictions in Russian gas supplies to Europe continued to support energy prices

UK gas market contracts extended gains yesterday

UK gas market contracts extended gains yesterday with significant upward pressure averaging to 4.58% across the curve. Contracts for a September delivery posted gains of 12.25p to settle at 361.48p but in contrast to recent activity the greatest increases were noted at the far end of the curve. Russian gas supply via the Nord Stream 1 is set to remain restricted to 20% of capacity at a rate of 32 MCM /day. LNG supplies to the UK remain healthy with year-to-date deliveries of 11.2 m tonnes already exceeding the entire 2021 import by some 0.2m tonnes. The UK will need to compete with mainland Europe for cargoes for the remainder of the year, but high LNG imports are expected to continue into the winter with the UK acting as an energy bridge to Europe.

Wind generation is forecast to drop

The restrictions in Russian gas supplies to Europe continued to support energy prices across Europe yesterday and the GB baseload curve was no exception. The winter 22 product settled at £549.50/MWh a record for contract as it gained a further £5.75/MWh yesterday. The September contract rose by £12.30 to £351.50/MWh. Baseload for the day ahead recovered on Tuesday as the contract settled 5.6% or £13.56/MWh higher. Wind generation is forecast to drop from Tuesday’s levels but still remain above the seasonal average.

Crude oil prices settled marginally higher on Tuesday

Crude oil prices settled marginally higher on Tuesday ahead of the OPEC+ meeting on Wednesday.  There is little hope that the group will boost output as there are questions as to the available capacity and recent economic data from China and the U.S. are pointing to a slowing in demand.  The U.S. dollar recovered against a basket of currencies yesterday and this provided some upside while there are expectations that U.S. crude reserves have declined over the last week too. At the close Brent for October delivery was 51 cents up at $100.54 a barrel, while West Texas Intermediate settled at $94.42 up 53 cents a barrel.

The GB gas system is forecast 4MCM short against today’s demand

In contrast to Tuesday’s opening, the GB gas system is forecast 4MCM short against today’s demand of 189MCM.  The prompt has reacted with the day ahead product gaining 38.95p per therm.  September has traded in a tight range of just over 2.30p so far with the last trade setting the high at 367.33p. The only other contract on the NBP curve to trade is October and that has gone through at 420.00p.  In the crude oil markets, Brent has dropped the $100 a barrel marker and is exchanging at $99.11 a barrel. OPEC+ are meeting this morning and it is expected output from the group will remain unchanged.

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