Gas markets continue to reverse yesterday’s gains

06 September 2022

 Gains were pared back over the session

Energy markets across Europe opened firmer on Monday as prices surged on the back of the news that Nord Stream 1 flows would not resume after maintenance works last week.  Capacity on the key gas pipeline to Europe had been ramped down to 20% after earlier maintenance in July with Gazprom blaming sanctions for restricting the import of parts for compressors. On the NBP, futures rose by over 150.00p with October peaking at 560.30p and the winter at 695.00p.  But the gains were pared back over the session as the supply risk has already been priced into futures.  At the close, October settled at 462.60p, up 53.18p while the winter gained 79.84p to close at 605.17p.  Prompt prices also rallied on the day and settled around 117.50p higher.

  GB baseload power futures firmed

The indefinite suspension of gas flows through Nord Stream 1 sent the energy markets across Europe rocketing on Monday. GB baseload power futures firmed with contracts gaining up to 15%.  October, the front month settled at £455.50/MWh, up £35.50/MWh while the winter contract added £58.50/MWh to close at £669.00/MWh. Baseload for the day ahead moved higher to £445.28/MWh with gains on the NBP prompt adding support on the day.  Carbon EUA futures out to 2024 declined by around 4.0% with the Dec-22 contract closing at €74.45 per tonne yesterday.

 Brent crude prices surged yesterday

Brent crude prices surged yesterday, recouping some of the recent losses, with the contract for November adding $2.72 to settle at $95.74. Despite ongoing recessionary fears curbing forecast demand and the potential resumption of Iranian exports, the OPEC+ proposal to cut daily output by 100,000 barrels from October signals its intent to maintain price stability by managing production. Russia’s declaration to cease exports to countries supporting the G7 proposed price cap have also led to supply concerns, as some European substitution of gas for oil becomes more likely with halted gas supplies through the Nord Stream pipeline. WTI for October gained $2.37 to settle at $89.24 a barrel.

Prompt prices are also in decline

The gas markets have continued to reverse the early gains from Monday this morning with a further 62.60p off the October contract on the NBP.  The last trade for the front month went through at 400.00p and is almost 10.00p below Friday’s close.  The winter contract has not traded yet but looks like it will open around 50.00-60.00p below last night’s close.  Prompt prices are also in decline this morning as the GB gas system is forecast 13MCM long against today’s demand of 198MCM. Most of yesterday’s gains in crude oil have been eroded with Brent down $2.35 a barrel as concerns of poor economic outlook and more interest rate hikes eclipses the proposed cut in output from OPEC+.  
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