EU talks of a softer price cap on Russian oil

Near NBP futures continued to firm

Near NBP futures continued to firm on Wednesday with contracts for the remaining winter months settling an average of 21.00p higher on the day.  Prompt prices settled mixed with the spot declining by 2.00p while the day ahead product added 10.00p as both contracts settled near the 120.00p mark. While the proposed price cap from the EU has the potential to increase gas demand, studies have shown evidence of demand destruction across Europe. Demand is down 25% since the start of October compared with last year.  A continued drop off in industrial demand could ease the already tight supply going into the winter, however, domestic gas use is down due to the mild weather, and this could easily flip should the weather turn.  LNG supplies to the UK keep coming with over a dozen tankers expected by mid-December.

Baseload power futures racked up more gains

Baseload power futures racked up more gains on Wednesday as comparative gas contracts on the NBP moved higher.  Gains in the carbon market also added support while clean spark spreads settled higher on the day too.  The front month for baseload power settled at £304.00/MWh, up £19.50/MWh while the summer contract added £6.75/MWh to close at £279.50/MWh. Forecasts for increased wind generation limited gains to the prompt yesterday.  Baseload for the day ahead settled 5.3% or £6.40/MWh higher on the day.  Carbon EUAs moved 2.7% higher with the spot closing at €75.88 per tonne.

 The EU are at odds as to the level the cap should be set

EU talks of a softer price cap on Russian oil combined with demand concerns in China were the main price drivers in the crude oil markets on Wednesday as Brent slipped to $85.41 a barrel.  The G7 along with the EU and Australia are committed to implement a price-cap on sea-borne exports of Russian oil on December 5th. The EU are at odds as to the level the cap should be set with latest discussions pointing to a higher ceiling which would make it still profitable for Russia to export oil.  Covid-19 cases in China continue to spread and there are fears that prolonged restrictions will slow demand further. A stronger dollar also weighed on crude oil prices on the day after reports that the U.S. Fed is to consider slowing interest rate hikes.

NBP futures have opened softer this morning

NBP futures have opened softer this morning with December declining by 7.19p to 294.53p.  The January contract is down 11.60p and the summer has moved 9.12p lower to 310.00p while contracts past this have yet to trade.  There little buying interest on the prompt this morning with offers pitched close to yesterday’s close despite the GB gas system showing a deficit of 5MCM against today’s demand of 252MCM.  Similarly trading on crude oil markets has been low-key as the U.S. markets will be closed today due to the Thanksgiving holiday.  Brent for January delivery is down 10 cents to $85.31 a barrel.  

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