UK gas market experienced huge volatility
The UK gas market experienced huge volatility during the session on Thursday as prices opened with significant premium added. It was apparent the market believed that the much-vaunted EU intervention in European energy markets was not going to have a major impact, especially in the absence of a price cap agreement. The October contract was a prime example of the volatility. The front month surged to a high of 460.00p and plunged a low 372.40, a spread of 87.60p, before settling at 386.55p, down 21.65p on the previous day. The Winter 2022 contract saw the same instability experiencing a spread of 33.84p before settling at 540.85p almost unchanged on the previous day.
GB baseload futures closely mirrored the direction of gas pricing
GB baseload futures closely mirrored the direction of gas pricing during the session yesterday as strong gains were evident from opening and were extended well into the afternoon. Following a selloff in the gas market the power curve followed suit and prices for all near periods finished below the previous close. The October contract shed £4.91 while November was down by £21.20 closing at £586.95/MWh. The power prompt continued to weaken with the minimum supply margin remaining comfortable. This comfort came despite the UK being a net exporter of power to the continent where prices are at a significant premium to the GB market
Crude oil markets posted significant losses
Crude oil markets posted significant losses during the session yesterday as the market once again turned its attention to the potential for significant demand destruction in the coming months. Expectation of weaker global demand were fuelled by an expected increase in U.S. interest rates and a downturn in economic activity in some major global economies. An increase in the value of the dollar against a basket of international currencies also weighed on the market. The stronger dollar typically reduces the demand for crude oil as it makes the product more expensive for holder of other currencies. At market settlement Brent Crude had shed $3.26 to close at $90.84.
Strong selling activity witnessed this morning
Gas futures prices have fallen sharply this morning, following on from yesterday afternoon’s retracement of earlier gains. Strong selling activity witnessed this morning is almost certainly being driven by news that the German government has seized ownership of the German division of the Russian oil major, Rosneft. Germany also announced that it is in advanced talks to take over Uniper SE and two other major natural gas importers in order to protect the integrity of its system. The news has driven October down by 50.79p, to 335.76p with remaining winter contracts down by around 35.00p/therm in early trading.