UK gas future contracts release risk premium this morning

31 October 2022

Strong buying activity supports far curve contracts

UK gas near curve contracts sustained their upward momentum during Friday’s session, in particular the November front month contract which settled at a two week high during its final day of trading  at 246.43p, as the return of Rough Storage injection volumes fed into the market. Further along the curve, momentum was less poignant, as contracts for delivery in 2023 shed 0.42p per therm on average, while Summer-23 the bellwether contract lost 3.42p to settle at 313.18p. Market concerns over future gas supplies supported buying activity for the 2024 seasonal contracts during the session, posting gains of 6.11p per therm on average. UK prompt market extended its recent gains, with the Within day and Day ahead product settled at 63.05p and 73.05p respectively.  

GB baseload power market tracks the UK gas market

The GB baseload contracts push higher during Friday’s session, as the near curve products took the brunt of the upward momentum, remaining in line with UK gas prices.  The front month November gained £35.25/MWh to settle at £280.00/MWh. Further along the curve, momentum was more stable with Summer-23 settling at £283.75/MWh up £3.25/MWh on the day. GB Baseload for Day ahead delivery pushed slightly higher on Friday to end the week  at £81.89/MWh, up £2.87/MWh on the day.  

Crude oil market take a step back during Friday’s session

Despite key oil benchmarks gaining momentum in recent days, the market was faced with Chinese demand concerns once again during Friday’s session. Brent crude front month contract moved 2.4% higher during the last five days of trading as data indicated an uptick in demand while the US dollar began to run out steam. However, Covid-19 lockdown concerns from the global powerhouse China filter back into the market, causing Brent Crude for delivery in December to settle $1.19 cents lower on the day at $95.77 a barrel. West Texas Intermediate front month also took a step down on Friday, trading at an $8.00 discount to Brent Crude.  

UK gas prices push lower on Bank Holiday Monday

UK gas futures contracts have opened lower this morning, with the new front month contract December shedding 20.64p to trade at 317.49 pence per them. The front quarter Q1-23 has also took a step back, as it last traded at 352.65p a decrease of 17.45p from Friday’s settlement. The UK gas system is balanced this morning with demand forecast at 233MCM. Rough Storage facility has returned, with  2MCM of injection forecast for today. The wider energy complex has also started this Irish Bank Holiday Monday in negative territory. Brent crude front month is down 55 cents at $95.22 a barrel while the EUA Dec-22 contract is down €2.89 at €78.37 a tonne this morning. Read more carbon market news in our Insights section.”