UK energy market displayed extraordinary movement yesterday

Prices on the UK NBP market surged higher

UK energy market displayed extraordinary movement during the session on Wednesday following the announcement by the UK government that they were planning to implement a price cap on wholesale energy prices for industrial and commercial users. At a high level a cap of £75.00/MWh was to be imposed on gas while the baseload power market would see a cap of £211.00/MWh for the coming Winter. While this announcement was expected to cool the market, prices on the UK NBP market surged higher during the morning and early afternoon session. However, the market experienced a sell off late on, with October shedding 75.70p intraday as it settled at 295.62p/therm down 19.74p on the day. Winter 2022 closed at 487.08p having peaked at 540.00p earlier in the day.  

  GB baseload power futures added premium

GB baseload power futures, save for the front month, adding premium in what was a highly volatile session.  The October front month contract settled at £285.00/MWh, down by £15.50 having traded much higher in the earlier pert of the session.  The announcement by the UK government of cap of £211.00/MWh on Winter 2022 appeared to encourage the market higher. The Winter 2022 baseload power contract settled at £508.00, up by £22.50 from the previous close.  The equivalent NBP gas contract finished slightly lower but clean spark spreads for the coming Winter increased by £44.00/MWh.  

The Brent crude contract for November delivery extended losses

The Brent crude contract for November delivery extended losses for the second session in a row as concerns about future demand and the prosect of the US federal Reserve increasing interest rates by a further 75 basis points.  The US has reported two quarters of negative growth and while this does not constitute a recession, the prospect for future crude oil demand in the world’s largest consumer of oil is diminishing.  This has combined with the relative strength of the dollar to put presume on the price of the commodity, particularly for purchasers in other currencies. Crude oil contracts for the front month of November slipped 79 cents to end the day at $89.83 a barrel.  

Energy markets are calm this morning

Energy markets are calm this morning with prices not moving too far from their previous settlement. Earlier movement at the front of the gas curve was lower but prices have reversed track in the last hour or so.  The front month October contract is priced at 300.00p/therm, up by just 4.38p from the previous close.  The announcement by the UK government of a Winter price cap is giving markets some food for thought.  Overnight the US Federal Reserve announcement of another 75-basis point increase in interest rates has had little impact on crude oil markets as Brent trades flat to the previous settlement.

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