Crude oil markets recover ground

02 November 2022

GB gas demand below seasonal norm

GB gas demand was well below the seasonal norm on Tuesday which pressured the prompt and near curve of the NBP.  High wind generation has displaced gas fired generators from the power stack, while the mild temperatures have also dented heating load.  The spot settled 28.00p down at 42.05p while the day ahead product closed at 47.95p, 14.55p lower.  On the curve, December the new front month declined by 21.05p to 279.69p while the summer 2023 contract shed just over 20.00p to settle at 274.92p.  LNG cargoes continue to arrive at UK ports and latest data suggests a further 11 shipments could top up supplies by the end of next week.

Prompt prices ease as wind generation remains high

Wind generation in the UK is expected to top 15.0GW on Wednesday and prompt prices eased as a result.  Baseload power for the day ahead settled 25.6% lower at £70.32/MWh.  Wind generation is expected to remain above average for the next week or so.  Lower gas prices on the NBP curve fed into the power curve on Tuesday as LNG facilities continue to be topped up.  December ended the session £20.50/MWh lower, while the contract for February was adjust lower by £64.25/MWh, the steepest fall of the day.  Further out, the summer and winter contracts for 2023 declined by £10.00/MWh and £18.75/MWh respectively.

 A weaker dollar offsets demand concern

A weaker dollar offset the demand concerns from China yesterday as crude oil prices recovered recent losses.  The U.S. Fed is expected to raise interest rates again on Wednesday with analysts expecting another rise of 75 basis points as curbing inflation remains a priority for the U.S. government.  Recent economic data from China has shown demand is still being impacted by their strict Covid-19 policies but there are hints that the world’s second largest oil consumer is to scale down the coronavirus restrictions over the coming months which would give a boost to demand.  At the close, Brent for January delivery was $1.84 higher at $94.65 a barrel.

NBP prompt rises in early trading this morning

Yesterday’s losses to the prompt and near curve have been reversed in early trading this morning.  Demand on the GB gas system is forecast at 210MCM for today, but supplies are lagging slightly.   The spot last traded at 67.50p while the day ahead is at 88.00p.  On the curve, December has traded up to 306.16p but last exchanged at 303.00p which is 23.31p up on yesterday’s close.  Contracts further out have yet to open but bid/ offer spreads are wide.  Brent has eased from yesterday’s close and is currently 32 cents down at $94.33 a barrel.