A volatile session ended with crude oil prices falling significantly

08 September 2022

UK gas market ended the session lower on Wednesday

A day of volatile trading saw UK NBP prices drop across the curve yesterday. A late rally helped curtail some of the losses, but over-all the market retreated. On the NBP, contracts for an October delivery shed 24.12p to settle at 404.06p, with Winter 22 contracts dropping 48.84p to end the session at 532.26p. EU energy ministers are due to meet on September 9th with the aim of halting the soaring energy prices and devise a bloc-wide response to the current energy crises. Should prices remain at the current levels, the prospect of demand destruction and subsequent economic decline seem inevitable. 8 further LNG deliveries are scheduled to berth at UK facilities during September helping to compensate for Norwegian supplies reduced by up to 132 MCM a day due to planned maintenance.

GB baseload futures market recover the losses from the previous session

The GB baseload futures market recover the losses from the previous session and pushed higher still as the gas market reacted to the delayed return of the Freeport LNG terminal from repairs. The gains in the power market were somewhat constrained by an easing of UK clean spark spreads.  The Winter 2022 baseload power contract is now priced at £749.50/MWh, up by a further £47.50. The day ahead baseload power contract was also impacted as wind generation levels remained below the seasonal norm and the system supply margin tightened.  

Heavy losses in the global oil market yesterday

Brent Crude prices came under significant pressure again yesterday with the contract for November shedding $4.83 to settle at $88.00, the lowest price observed since January. West Texas Intermediate for October came under similar pressure shedding $4.88 to settle at $81.63 a barrel. Poor economic and export data from China continue to weigh on the market as a global recession seems inevitable. President Putin’s announcement to halve the export of Russian commodities should the G7 proposed price cap be implemented provided some support to prices, but likely EU and US interest rate hikes as well as record inflation levels are capping international demand for Crude oil.  

The UK gas market continues to erode risk premium this morning

The UK NBP gas market has opened weaker again this morning with contracts that have traded thus far shedding premium.  The front month October contract has shed 23.00p in early trading and is priced at 381.00p/therm. November and December are likewise under pressure with losses of 28.00p and 36.00p respectively. Forecast gas demand in the UK this morning is running at 214MCM, and the system is running in balance.  As ever the UK is providing significant supplies to continental Europe with exports via the Becton Zeebrugge interconnector running at 89MCM. Crude oil markets have retraced below the $90 a barrel market with Brent crude down by $3.59 at $89.24 a barrel.  
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