Brent crude oil prices climbing back from a nine-month low

28 September 2022

 The sharp increase occurred in response to news a leak identified yesterday

UK gas futures traded at approximately 10 pence to 30 pence per therm above the previous days close for the majority of the day yesterday, before a late afternoon surge drove day on day gains of as much as 85 pence per therm on near futures contracts.  The sharp increase occurred in response to news a leak identified yesterday on the Nord Stream 2 pipeline may have been the result of sabotage. The leak came just a day after a similar occurrence on the Nord Stream 1 pipeline. It seems that those trading the market may have overlooked the fact that there was no gas being delivered through the pipelines in any event. After trading in a range of 240.00p to 322.00p, the October contract settled at 255.65p while the Winter contract gained 26.28p to close the day at 481.40p.  

 Carbon EUAs reversed previous session gains

An increase in gas prices filtered into the GB baseload power market on Tuesday as October the front month gained £18.00/MWh to settle at £295.50/MWh. However, the Q1-23 contract took the brunt of the upward momentum, gaining £55.75/MWh to settle at £685.50/MWh.There was a marginal increase in the baseload for the day ahead also on Tuesday. The contract gained £7.70/MWh to settle at £208.25/MWh. Carbon EUAs reversed previous session gains, with the spot contract settling €2.16 down at €67.81 a tonne.  

Prices were supported by a slowdown in US output

Tuesday’s session saw Brent crude oil prices climbing back from a nine-month low, with the front month settling at $86.27 a barrel up $2.21 on the day. Prices were supported by a slowdown in US output, as the southern region of the country which accounts for 15% of the national crude output prepares for a category 2 storm. Pressure eased further in the oil commodity market in correlation to reserves in the US dollar against other major currencies. A frequent refrain among market watchers is that the dollar’s strength, as it can undermine the price of oil since crude transactions are most frequently conducted in dollars and so rising greenback strength often tempers the rise in crude.  

Future contracts pushing higher

The UK gas market has picked up where it left off yesterday, with future contracts pushing higher. The front month product October has gained 33.342p and is currently trading at 289.07 pence per therm. Prompt contracts are also trading high, with the Spot and Day ahead contract trading at 235.00p and 220.00p respectively. The UK system is fractionally undersupplied this morning by 6MCM while demand is forecast at 273MCM. The Norwegian Kollsnes gas processing plant is on its final day of annual maintenance, with curtailments easing to 26MCM. Brent crude prices slipped this morning as the US dollar hits a fresh peak, the front month contract is trading at $85.85 a barrel.  
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