Political intervention pressures gas and power prices on Friday

12 September 2022

 UK gas prices lost value on Friday

NBP gas contracts lost momentum on Friday, as Europe’s proposal to cap imported pipeline gas prices, introduce regulations to limited price volatility and the UK’s commitment to introduce a price cap being the key drivers of the downturn in UK gas prices. The front month contract October lost 32.62p on the day to settle at 378.29 pence per therm while Winter 22 settled at 518.73p, down 28.43 pence per therm. The European Commission is set to publish clear measures in the coming days, highlighting the groups plan to combat the current energy crises, with demand reduction expected be a key mechanism for Europe this winter. The UK prompt market also lost value on Friday as the system remained oversupplied, the Within day contract and Day ahead contract closing at 325.10p and 325.20p respectively.

GB baseload futures posted heavy losses during Friday’s session

GB baseload prices displayed modest declines during Friday’s session as the downward sentiment in the gas market filtered into power prices. The December contract took the main brunt of the downward pressure, loosing £161.55/MWh to settle at £547.95/MWh. Winter 22 contact ended the day at £505.25/MWh, its lowest level since early August. Baseload for the day ahead moved in the opposite direction of baseload curve prices, closing at £322.16/MWh up £56.12/MWh due to low wind generation output. European carbon prices ended the week at a new six month low on Friday, as the EUA spot contract closed at €65.71 a tonne.

Crude oil prices gained value on Friday

Oil prices climbed higher on Friday, taking direction from President Putin’s treat to cut all energy supplies to the West during a time of tight supply. Weakness in the US dollar also supported prices, as the currency traded lower on Friday following a month-long rally. Nonetheless, the commodity has sustained volatile movement in recent sessions, on the back of aggressive interest rate hikes which have weighing heavily on global economies. Global research house Energy Aspects have estimated that Chinese oil consumption is forecast to decrease for the first time since 2022 by 380,000 barrels a day this year, a clear indication of the economic slowdown in the world’s second largest oil consuming nation. Brent crude front month settled at $92.84 a barrel, up $3.69 on the day.

UK has market has opened softer this morning

UK gas prices have opened softer this morning, following on from Friday’s downward trend. The October contract is currently trading at 365.00p down 13.29 pence per therm while the November contract last traded at 471.03p, down 24.45 pence per therm. The remaining curve contracts are yet to trade. GB gas demand is forecast at 213MCM for today and the system is currently balanced. Interconnector exports to Europe are robust at 89.55MCM this morning. Brent crude prices have also opened high, with the front month trading at $93.78 a barrel. The demand and supply equilibrium continues to influence prices, with a currently tight system supporting prices.
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