Crude oil markets are under pressure once again

UK gas market was once again lacking any clear direction

The UK gas market was once again lacking any clear direction as prices swung between gains and losses on multiple occasions over the course of the trading day.  The spread between the high and the low was less than in recent sessions being contained to just +/-20.00 for near term months.  The announcement by the UK government of a Winter price cap is still leaving the market to ponder the overall impact on wholesale prices.  At market close it was apparent that the bears had won out with most contracts displaying modest losses.  The front month October contract settled at 287.61p a therm down 8.01p on the day. The Winter 2022 contract fared similarly posting a drop of 7.89p to settle at 479.20p a therm.

  GB baseload power market surged higher

The GB baseload power market surged higher with price pressure most evident on Winter 2022 which is the period where the new price cap support will impact. The front month October contract added £20.00 to close at £305.00/MWh while both November and December added £32.75 and £59.75, respectively. The December contract is now trading above the expected upper limit of the proposed cap. This level is yet to be confirmed and we may get some additional information on this after the UK mini budget.  Baseload prompt prices took a further step lower despite wind generation remaining 20% below the seasonal average

 Crude oil market posted gains during the session yesterday

Following two sessions of losses the crude oil market posted gains during the session yesterday.  The spread between the high and the low came in at just over $3.00 as the market sought out new signals for direction.  The recent build in US stocks reported by the Energy Information Administration provided a bearish signal but this was somewhat outweighed by some issues on the demand side.  This supply tightness was highlighted by the fact that the OPEC plus Group and once again missed its production target by 3.8million barrels a day. In addition, the prospect of a breakthrough on the Iranian nuclear deal diminished and kept at least 1 million barrels a day out of the market. Brent Crude for November delivery ended the session at $90.46 a barrel a gain of 63 cents on the day.

 Difficult to determine the direction of the gas market this morning

It is difficult to determine the direction of the gas market this morning as prices have slipped between negative and positive movements in the first hour of trading.  Prices for near term contracts were up on opening but the market has given up the majority of these gains already.  In reality the contracts that have traded are oscillating near to their previous settlement. The Winter 2022 contract has yet to trade, and bid/offer spreads are especially wide at this point.  Crude oil markets are under pressure once again and Brent is priced at $88.67 per barrel, down by $1.79 from last night’s settlement.

Read more carbon market news in our Insights section