The sell-off from yesterday morning continued this morning

02 December 2022

UK gas future contracts slump after a morning spike

UK gas future contracts slump after a morning spike during yesterday’s session. In the early hours of trading the market showed clear signals of upward trajectory with Q1-23 peaking at 404.73p per therm. However, momentum shifted in the afternoon and Q1-23 eventually settled at 347.91p, down 21.86p per therm on the day. The late selloff enabled risk premium to erode from the front of the curve, as the front month contract January sustained the heaviest loss, down 25.45p at 344.20 per therm. Fundamental balance in the UK remained sideways throughout the session, encouraging the prompt market to ease. UK gas for day ahead delivery settled 8p lower at 330.05p per therm, a discount of 9.28p to the TTF equivalent.  

Majority of GB baseload power future contracts were down

The majority of GB baseload power future contracts were down yesterday due to a late selloff in the gas market, however further dated contracts sustained marginal gains while the front month gained £0.75/MWh to settle at £545.25/MWh. Despite the bellwether contract Summer 23 shedding £6.25/MWh to settle at 304.25/MWh, it has gained £32.50/MWh over the last five days of trading. GB baseload for day ahead delivery extended its gains for the second consecutive session, ended the day at £340.82/MWh, up £9.97/MWh. Momentum in the EUA carbon market remains firm, with the spot contract closing at €84.84 a tonne, a three month high.  

 Brent crude prices extended gains

Brent crude prices extended gains for the second consecutive session yesterday, as supply and demand fundamentals continued to influence the market. Brent crude front month settled $1.45 higher at $86.88 a barrel. China’s government continued to lift Covid restrictions, which has encouraged the possibility of higher demand from the world’s second largest consumer of the commodity. The European Union made a tentative agreement to cap Russian seaborne oil at $60 a barrel yesterday, with a Monday deadline to finalise the agreement. It is not clear if all EU nations will back the deal as the Baltic countries asking for a firmer cap due to the fact that Russian oil is currently trading at approximately $45 a barrel.  

 Prices on the near curve falling further

The sell-off from yesterday morning continued into this morning with prices on the near curve falling further. Having opened up briefly from yesterday’s close, front month January has fallen by over 17.00p per them last traded at 326.50p having been as low as 319.00p. The bears have full control of the near curve, with the rest of Q1-23 following a similar trajectory, with prices for the quarter contract down 21.00p.  There has been limited trading on the prompt market. The UK system is well supplied being 10mcm long despite forecasted cooler weather in the UK. The bull run on oil on the back of the curbing of covid restrictions in China oil appears to be losing momentum with prices up only marginally.  
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