UK gas contracts took a turn downwards on Friday
UK gas contracts took a turn downwards on Friday, as a healthier supply and demand balance in the near-term pressured contracts from the front of the curve. November the front month contract released 39.98p to settle at 285.04 pence per therm while Summer-23 lost 26.42p to end the day at 384.50 pence. Risk premium was slower to fall out of contracts further along the curve, as the sense of uncertainty surrounding fundamentals remains present. Prompt contracts eased again on Friday, following healthy supply, the Within day and Day ahead contract closed at 165.05p and 168.05p respectively.
Mixed movement was evident in the GB baseload market on Friday
Mixed movement was evident in the GB baseload market on Friday, as the front month November lost £19.00/MWh to settle at £497.00/MWh while the December contract moved in the opposite direction, gaining £2.60/MWh to settle at £652.60/MWh. Risk premium has scaled back on the front month contract in line with the fall in UK gas prices, as fundamentals appear healthy in the near term. Weather fundamentals fed into the GB baseload prompt market, as wind generation output was forecast 20 percent above seasonal norm on Friday. The baseload day ahead contract lost £29.07/MWh on the day to settle at £124.92/MWh.
Brent Crude prices pushed higher during Friday’s session
Brent Crude prices pushed higher during Friday’s session, maintaining a five-week high. The market took direction from OPEC+ largest production cut since 2020, just ahead of the European Union’s sanction on Russian oil which will add further pressure to an already tight market. Oil markets also found support in the slowdown of the US Strategic Petroleum Reserve which has hit its lowest level since 1985, after the US government ordered a record release of oil to ease energy prices. Brent front month contract gained $3.50 on the day to settle at $97.92 a barrel while the WTI equivalent settled at $92.64 a barrel.
UK gas futures have opened softer this morning
UK gas futures have opened softer this morning, with the front month contract currently trading at 270.00p, down 15.04 pence per therm, while Q1-23 is down 7.18p at 448.00 pence per therm. However, liquidity is thin this morning with remaining contracts yet to trade. The UK system has opened marginally oversupplied by 11MCM this morning, with healthy supplies of 171MCM coming from Norway and the UK Continental Shelf. Robust wind generation output has softened gas for power demand which is currently forecast at 39MCM. Brent crude front month is currently trading at $96.97 a barrel, fractionally lower from Friday’s session.
10 October 2022
