European gas market is unrecognizable a year on from invasion

24 February 2023

UK gas prices remained stable with little movement

Yesterday, UK gas prices remained stable with little movement observed across the curve. The front-month contract for March was just short of a 1.00p increase, settling at 126.22p per therm. Meanwhile, Summer 23 settled 0.78p higher at 126.33p, a significant drop from its historical high of 726.26p on August 28th of last year, during a time when EU member states were ordered to meet storage level targets due to lower Russian exports. The calmness we have recently witnessed in the UK gas market is a welcoming sign, following the first anniversary of the Russian invasion of Ukraine. This is due to significant demand reduction, ample LNG imports, and healthy storage levels which has enabled a drop from approximately 45% to less than 10% of Russian gas flowing into Europe

Sentiment in the UK baseload power market was relatively flat

Sentiment in the UK baseload power market was relatively flat during yesterday’s session, as contracts across the curve edge fractionally higher. Price ranges remained extremely tight once again, with the front month shifting £1.00/MWh lower over a five-day average to settle at £137.00/MWh yesterday. Spread spreads premiums have maintained their downward trajectory, which is a welcoming sign. Baseload power for Day ahead delivery pushed lower, with yesterday’s session ending at £129.76/MWh, a decrease of £4.16/MWh and significantly lower than the same session last year, with a decrease of £33.46/MWh.

Brent Crude front month rallied to $82.58 yesterday

Brent Crude front month rallied to $82.58 yesterday but failed to hold all the gains and eventually settled at $82.21 a barrel up $1.61 on the day. Support arose from an expected rise in US inventories while Russia plans to stop oil exports to Western ports by up to 25% in March compared to February. The cut may be a result of Russia’s inability to sell its oil, as Chinese and Indian refineries are flooded with Russia flows since the invasion of Ukraine. Overall, oil markets continue to access the supply and demand outlook and until then, the commodity is likely to remain in the middle of a consolidation area as indecisiveness continues to linger.

 UK gas prices have opened higher this morning

UK gas prices have opened higher this morning, with slightly more upward movement compared to yesterday muted market. The front month contract March last traded at 130.40p per therm, up 4.18p from yesterday while the front quarter last traded at 127.59p, 2.44 pence per therm higher. The UK gas system is relatively balanced with demand forecast at 284MCM. In the wider energy complex both carbon and oil markets have opened in positive territory. The EUA Dec 23 contract last traded at €99.72 a tonne, €2.14 higher from yesterday’s close, while the Brent crude front month last traded at $81.08 a barrel.  
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