Brent crude recovered some ground in a volatile session

UK gas market continued to give up premium

The UK gas market continued to give up premium with the gas prompt continuing to pile pressure on near term contracts.  The prompt weakness was once again evident as spot and day ahead contracts languished at sub-50.00p per therm.   On the supply side the UK market was well balanced although exports to continental Europe were constrained to just 59MCM which is well below the maximum capacity available.  The November 2022 contract has suffered losses for five sessions in a row and declined by 18.79p yesterday to bring the contract to 182.71p and a cumulative loss of 111.19p in five sessions. The December contract is under similar pressure but remains at a premium of over 150.00p to the front month.  

GB baseload power contracts shed premium

GB baseload power contracts shed premium across the board as all contracts went lower.  The front month November contract shed £16.25 while December had a more modest decline of just £6.00.  The Q1 2023 contract took a pounding as £50.25 fell out of the contract with January 2023 shedding £70.50 for close at £800.00. The losses on these contracts were far in excess of gas losses as spark spreads and to a lesser extent carbon costs eased. GB baseload for day ahead moved off its low to add £28.00 but this contract remains relatively weak as it closed at £92.25/MWh and the monthly index tracked at £165.65/MWh.  

1.7-million-barrel decline in crude stocks in the last week

Brent crude contract for December delivery broke a three-session losing streak and recovered some ground in a volatile session. The market peaked at $92.71 in the afternoon part of the session having traded at a low point of $89.32 in the morning, a spread of $3.39. The market had eased in the last number of sessions on the release of 15 million barrels from the U.S. strategic reserve while the prospect for increases Chinese demand were played down.  However, the release of the weekly U.S., inventory target provided the signal for the market to push higher.  The data revealed a 1.7-million-barrel decline in crude stocks in the last week and Brent crude added $2.38 as a result.  

 UK NBP market has opened higher this morning

The UK NBP market has opened higher this morning and prices have firmed further in the last hour or so as more trades go through.  The only periods that are being actively traded at the moment are the front month and December contracts. November has added 25.79p in early trading while December is priced at 367.00p/therm, up by 26.50p from last nights close. Further out the market is quite illiquid with wide bid/offer spreads a key feature. On the supply side the system is finely balanced with a small deficit of 2MCM on an overall forecast demand of 263MCM. Brent crude is priced at $93.18 a barrel, up by 77 cents.

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