UK gas market prices continue to shift lower this morning

22 December 2022

 The recent bearish run remained intact

The recent bearish run remained intact during yesterday session, as UK gas future contracts continued to release heavy risk premium from the front. Wednesday’s losses marked the fourth session in a row where NBP contracts finished the session lower as we edge closer to the end of 2022. The front month contract settled at 241.95 pence per therm a price not seen since late May, while the front season lost 17.96p to settle at 244.52p. Losses were evident in the prompt market also, with the Day ahead contract followed a similar trajectory, settling 27.50p down at 200.05p per therm. The day ahead contract has traded at 324.25p per therm on average so far in December, up 205.20p from November’s average. Divergence between UK Day Ahead and TTF equivalent settled at 30.06p pence per therm yesterday, compared to 38.42p in the previous session.  

 GB baseload contracts extended their losses

Following the downward sentiment in the UK gas market, GB baseload contracts followed a similar pattern and extended their losses yesterday. Healthy near-term fundamentals have supported the selloff amid lower demand expectations and mild weather conditions. January 23 the front month took the brunt of the downturn, settling £22.25 lower at £265.75/MWh. EUA carbon market reversed the majority of gains made in the previous session yesterday. EUA spot contract settled at €84.70 a tonne down €1.55 on the day.  

Brent crude oil prices pushed high

For the third consecutive session Brent crude oil prices pushed high. Gains for the global benchmark front month contract surpassed $2 a barrel in the afternoon, as the market reacted to a larger than expected decrease in US crude stockpiles, a decrease of three million barrels compared to the expectation of 167,000 barrels. The large shift provided market assurance that falling demand continues to ease. Nonetheless, Chinese demand remains uncertain. The oil hungry nation continues to reopen from Covid 19 lockdowns, but it remains unclear on how fast economic activity can return to normal levels. Brent Crude front month settled at $82.20 a barrel up $2.20 on the day.  

Liquidity in the prompt market is thin

A welcoming start to the day in the UK gas market this morning, as prices continue to shift lower.  January the front month contract last traded at 230.63p down 11.32p from yesterday’s settlement. The front quarter Q1 23 is also in negative territory, down 10.72p at 234.75 pence per therm. Liquidity in the prompt market is thin, with contracts yet to trade. The UK gas system is 16MCM undersupplied with demand forecast at 324MCM. Brent crude has picked up where it left off yesterday, last trading at $83.59 a barrel up $1.39 as the US prepares for a winter storm.  
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