UK gas prices shed value from the front of the curve

10 November 2022

 NBP gas market continues to erode risk premium

Despite a lack of strong directional signals, UK gas prices retreated during Wednesday’s session. Following a recent trend, the front of the curve displayed the most significant losses, taking direction from ample supply in the near term and low seasonal demand. The front month contract December which peaked at 875.14p in late August settled 270.87p down 12.94 pence per therm on the day. Summer-23 contract reversed the previous session gains to eventually settled at a weekly low of 281.01p down 12.31p per therm. The TTF, Europe’s benchmark gas hub extended its premium to the UK prompt market on Wednesday. TTF Day ahead contract gained 18% on the day to settle at 239.88p per therm while in NBP equivalent moved in the opposite direction, settling 3% lower at 92.86 pence per therm.

GB baseload power contracts display significant losses  

GB baseload future contracts took direction from falling UK gas prices on Wednesday, with significant risk premium eroding from the front of the curve. Losses on the day eventually surpassed the NBP gas market as spark spread premiums lost momentum. The January-23 contract took the brunt of the downward pressure, shedding £77.25/MWh to settle at £523.25/MWh. Market sentiment was flat further along the curve. Baseload for the day ahead also retreated during yesterday session, settling at £100.16/MWh, down £4.36/MWh. Robust wind generation of 17.4 GW coupled with mild weather conditions weighed on the contract.

 Brent oil hits monthly low

Global oil benchmarks extended their losses during Wednesday’s session as the market took direction from a higher than anticipated increase in US crude oil stockpiles. Inventories increased by 5.6 million barrels, while an increase of only 1.4 million barrels was forecast. Additional volumes would be welcomed in normal circumstances however, lingering covid lockdowns in China and a global economic slowdown may curtail global demand resulting in a supply surplus. Brent crude front month settled $2.71 lower at $92.65 a barrel, its lowest level to date in November. The WTI equivalent contract lost $3.08 before ending the day at $85.83 a barrel.

UK gas prices open fractionally lower this morning  

UK gas future contracts have opened in negative territory this morning, however losses are fractional in comparison to recent market trends. NBP front month last traded at 266.00p down 4.87 pence per therm while the front quarter is down 1.85p at 315.00 pence per therm. The UK gas system has opened balanced, with exports to the continent forecast at 74MCM via the IUK and BBL pipeline between the UK and The Netherlands. Oil markets have also opened softer this morning, with the Brent crude front month currently trading at 92.20 a barrel, down 45 cents.
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