Second day of substantial declines the NBP futures market

01 September 2022

Marked declines on the UK NBP market were sustained

Marked declines on the UK NBP market were sustained for a second day yesterday as concerned speculators continued exiting positions. Contracts for delivery for the front month of October shed 65.62p to settle at 458.90p a therm, but the greatest retreat was for Summer and Winter 2023 contracts each slipping roughly 21% to end the day at 448.03p and 444.97p respectively. Substantial LNG deliveries continue to support the UK system with 9 vessels set to berth at British facilities by September 11th. This rate of LNG delivery to the UK is over twice that recorded for September 2021 and is helping to control the prompt. Centrica has now received the regulatory approval required to restart operations at the Rough storage facility.  

Carbon EUAs declined by around 7.7% yesterday

A second day of sharp losses on the NBP curve drove the baseload futures lower on Wednesday as September closed £42.25/MWh down.  The front winter and summer contracts shed close to £70.00/MWh but prices remain elevated.  Carbon EUAs declined by around 7.7% yesterday with the spot closing at €79.53 per tonne. With prompt prices on the NBP tumbling by over 100.00p per therm on Wednesday it was no surprise to see the power prompt follow suit. Baseload for the day ahead shed 16.8% or £83.83/MWh to close at £416.17/MWh.  

Crude oil prices shed further premium yesterday

Crude oil prices shed further premium yesterday, particularly on the near curve, as continued fear of a global recession takes hold. Contracts for an October delivery slipped $2.82 to $96.49 a barrel. WTI contracts for October fared similarly shedding $2.61 to settle at $89.03 a barrel. China’s continued zero-tolerance policy to Covid in the face of a surge in infection rates in key industrial hubs like Guangzhou and Shenzhen, has led to a decline in factory activity measured for August. China, the second largest consumer of Crude oil now has a negative demand outlook for the remainder of the year. OPEC+ are due to meet on September 5th and will discuss the current oil market surplus of some 900,000 barrels a day for 2022, a surplus now expected to extend into 2023.  

Crude oil price sentiment remains negative

Following a second day of substantial declines the NBP futures market today has continued to experience downward pressure with October, trading most recently at 457.00p. With Nord Stream 1 in the second of three scheduled days of maintenance, the impact has not been noted on prompt prices with the day ahead last trading at 315.00p. Should maintenance take longer than expected the situation might change. The GB gas system is currently forecast to be very nearly balanced at roughly 350 MCM for today.  Crude oil price sentiment remains negative with Brent Crude last trading at $94.07 a barrel, down $2.42.
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