October displayed the strongest sell off during the session
Friday saw the UK gas market finish the week on a bearish note, as considerable risk premium fell out of NBP near curve contracts. The front month contract October displayed the strongest sell off during the session, with the product eventually closing at 290.81p, down 95.74 pence per therm on the day. Despite the market’s volatility and substantial price swings during trading, the downward sentiment was largely sustained during the week. Winter 22 the bellwether contract was down 41.60p over the last five days of trading and settled at 477.13 pence per therm on Friday. NBP prompt market took a further step down on Friday also, with the Within day and Day ahead contract shedding 134.90p and 104.10p respectively.
GB baseload contracts shed significant premium on Friday
GB baseload contracts shed significant premium on Friday ahead of the UK bank holiday, the front month October contract saw the largest drop from the previous session, down £58.00/MWh to settle at £302.00/MWh. A significant selloff in the UK gas market fed into the downward sentiment coupled with a downturn in the spark spread market. The day ahead baseload contract lost over 15% on Friday, to settle at £285.85/MWh as wind generation forecast output remained robust, meeting 21% of the UK’s 25GW power demand today. EUA spot carbon price settled at €72.86 a tonne on Friday, up €1.42 on the day.
Global oil prices were broadly steady on Friday
Global oil prices were broadly steady on Friday, with the Brent crude front month settling at $91.35, up 51 cents on the day. However, the commodity lost 2% over the last five days of trading, as the market remains consumed by recession fears and weakening demand outlook, particularly in China the world’s second largest oil consumer. The Internationals Energy Agency’s latest demand outlook for the fourth quarter of the year is at zero growth. Nonetheless the fundamental supply and demand balance is in the hands of the oil cartel OPEC+ who can curtail output levels in an attempt to support prices. Over 80% of the world’s oil reserves are located in OPEC+ countries.
Liquidity on the UK gas market is extremely thin this morning
Liquidity on the UK gas market is extremely thin this morning due to the UK Bank Holiday. The front month contract October is currently trading at 289.79 pence per therm, broadly in line with Friday’s settlement. All other contracts are yet to trade on the NBP gas market. The UK system has opened oversupplied by 13MCM while demand is forecast at 225MCM. The wider fuel mix has opened lower this morning, with the oil market feeling the pressure from recession fears coupled with strong US dollar. Brent crude front month is trading at $90.21 a barrel. EUA Dec 22 contract is currently trading at €71.10 a tonne, down €2.17 from Friday’s settlement.