Global oil benchmarks failed to hang onto premium

UK gas future contracts drifted lower on Wednesday

UK gas future contracts drifted lower on Wednesday with the support of healthy near-term fundamentals. The front month contract December reversed the gains from the previous two session and settle at 269.73p, down 29.17 pence per therm. Near term fundamentals including ample LNG supply and healthy imports from Norway has enable risk premium to erode from the front. December 22 contract peaked at 875.14p on August 26, a premium of 605.41p per therm to yesterday’s settlement price. Losses were modest further along the curve, as a sense of uncertainty still lingers, the front season Summer 23 lost 11.13p to settle at 285.60p per therm. Prompt contracts also pushed lower, as Within day and Day ahead lost 27.00p and 31.00p, respectively. The NBP day ahead contract has traded at 95.30p on average in November.

Significant premium fell out of the January 23 contract

GB baseload power reversed the gains in the previous session to close lower day on day. Losses in the wider energy complex supported the downward momentum as UK gas and carbon prices fell. December the front month lost £25.00/MWh to settle at £265.00/MWh. Significant premium also fell out of the January 23 contract which was down £60.60/MWh over the last five days of trading and closed at £462.65/MWh. Baseload for day ahead delivery pushed lower for the second consecutive day, settling at £109.33/MWh, down £13.67/MWh. Robust wind generation forecast at 12GW pressured the contract coupled with a weak UK gas prompt market.

Oil market continued to battle between demand and supply concerns

Global oil benchmarks failed to hang onto premium gained in the early hours of trading yesterday. The early upward sentiment took direction from the return of Russian oil flows into Hungary and Slovakia after a brief outage on the Druzhba oil pipeline. However, prices began to fall in the afternoon. As the oil market continued to battle between demand and supply concerns with conflicting signals continuing to influence the sentiment. West Texas Intermediate crude futures lost $1.33 to settle at $85.59 a barrel while Brent crude front month shed $1.00 to end the day at $92.86 a barrel.

Losses visible along the near curve

UK gas future contracts have picked up where they left off yesterday, with losses visible along the near curve. The front month contract December opened at 250.00p and last traded at 252.00p per therm while January 23 has released 21.98p and is currently trading at 295.00p per therm. The market continues to take direction from robust gas supplies while demand remains below seasonal norm. UK gas system is currently 6MCM oversupplied with demand forecast at 260MCM.  In the wider energy complex, carbon opened higher after yesterday’s heavy losses. EUA Dec-22 contract is trading at €73.80 a tonne.

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