UK gas market opens lower, with a possible EU intervention on the horizon

09 September 2022

 UK gas front month resists a bullish prompt market

UK gas prices were on track to continue their downward trend yesterday, however in the late afternoon the market flipped, and a late surge lifted NBP gas contracts modestly higher on the day. The uncertainty surrounding Friday’s EU energy meeting to discuss the currently crises was reflective of the mixed sentiment during the session. Winter 22, the bellwether contract opened at 490.00p, down 42.26p from the previous session before regaining value to settle at 547.16 pence per therm. The front month contract October resisted a very bullish prompt market, dropping to a low of 355.60 pence per therm before rebounding to end the day at 410.91p per therm. Within day and Day ahead contracts settled 115.00p and 111.55p up respectively, despite the system remaining relatively balanced.

 GB baseload futures prices release premium yesterday

For the third consecutive day, GB baseload power market shed value as the spark spread market came under pressure. The UK governments announcement to cap domestic bills for two years and business rates for six months fed into the market. The October and November contracts lost £24.00/MWh and £100.00/MWh respectively while Winter 22 settled at £575.00/MWh. EUA carbon prices hit a six month low on Thursday, with allowances for December 22 delivery falling to €66.69 a tonne. The downward sentiment was on the back of the European People’s Party announcement that it would support a proposal to bring addition supply to the carbon market in order to ease costs.

Crude oil markets pushes higher

Volatility in the global oil markets eased on Thursday, with Brent crude claiming back some of the heavy losses in recent sessions. The market took support from Vladimir Putin’s threat to cut the West off from its gas and oil exports, in an attempt to counter the impact of Europe’s anticipated price cap. However, gains were limited as the gloomy economic outlook and rising inflation rates continue to weigh heavily on the global demand outlook. The European Central Bank announced yesterday that it will raise interest rates by 0.75%, the largest increase in the history of the bank. Brent crude peaked at $89.57 before settling at $89.15 a barrel, up $1.15 on the day. While US West Texas Intermediate front month settled up $1.60 a barrel at $83.54.

UK gas market open’s lower this morning

The recent downward shift has returned to the UK gas market this morning, with the front month October down 3.91p at 407.00 pence per therm while November is down 18.99p at 504.92p. The remaining curve contacts on the NBP market are yet to trade. All eye’s today will be on the EU Energy Minister’s meeting, where the group will discuss the introduction of price caps. Despite the UK system opening slightly oversupplied by 7MCM, the Within Day contract is up 20.15p at 330.00p per therm while Day ahead is yet to trade. The Brent crude market has continued where it left off yesterday, with the front month currently up $1.40 a barrel at $90.55.
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