Stronger dollar weighed on crude oil prices yesterday

UK energy markets were twitchy after Monday’s bank holiday

The UK energy markets were twitchy after Monday’s bank holiday and prices for NBP futures flipped between gains and losses for much of the early session.  The steep declines from Friday were retained for the most part although near contracts drifted higher later in the session on supply concerns.  The lead month, October, settled at 315.36p, gaining 32.95p while the winter added 25.22p to close at 491.73p.  Prompt prices were buoyed by increased demand yesterday while imports from Norway remain curtailed due to maintenance works leaving the GB gas system tight.  The day ahead rose by 12.04p yesterday while the balance of month contract settled at 252.50p, up 6.24p.  

 GB baseload power futures contracts settled with gains

GB baseload power futures tracked the NBP gas curve on Tuesday and contracts settled with gains for the most part. The front month, October, added £19.65/MWh to close at £300.50/MWh while gains to contracts further along the curve were generally less than that.  Carbon prices on the day were flat with the spot closing at €70.74 per tonne. The day ahead baseload product eased despite lower wind generation on the day and forecasts for below the seasonal average for the remainder of the week. Wind generation is expected to average 4.3GW until Friday.  

 Brent reversed the gains from the previous two sessions

Brent reversed the gains from the previous two sessions on Tuesday as the markets fear the U.S. will raise interest rates for the third time on Wednesday. The U.S. Federal Reserve’s is expected to increase interest rates by a further 75 basis points and this heavy-handed approach to curb inflation has scared investors while also sending the dollar to almost 20-year highs.  The stronger dollar also weighed on crude oil prices yesterday while news that the U.S. Department of Energy is to release a further 10m barrels of oil from its Strategic Petroleum Reserves in November added to the downside.  Brent for November delivery settled at $90.62 a barrel, down $1.38.  

 Gas prices have opened firmer this morning

The British government have announced plans to shield business from the rising energy prices with the electricity price for the coming winter being capped at £211/MWh and gas at £75/MWh.  It would appear that the cap will apply to contracts signed from the 01-Apr-2022 although the finer details have yet to be published and it is not clear if this will apply to all commercial users in Great Britain and Northern Ireland.  Gas prices have opened firmer this morning with October adding 23.64p while the winter is 48.27p higher which may be in response to Mr Putin’s promise to mobilise more reserves and use any means necessary in the war.

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