Reports of conflict on the Ukraine Russia border spooked the market

Gas Market

Near curve NBP gas contracts opened in negative territory and continued to fall in early trading. The market appeared to be reassessing the risks associated with escalation in the Middle East and weighed them against the strong market fundamentals that persist in Europe despite some niggles with production in Norway. However, not long before mid-day news began to hit the market that Ukrainian soldiers had broken through the Russian border and fighting had broken out close to Sudzha, the last operational trans-shipping point for Russian gas to Europe via Ukraine. The pipeline shipped 14.65 billion cubic meters of gas in 2023, or approximately 50% of Russia’s exports to Europe. As a result, coupled with continued uncertainty in the Middle East, the September contract traded to a high of 95.28p/th, and intraday gain of 7.37p before settling lower at 94.46p/th.  

Power Market

Forecasts of strong wind generation capped rises on the GB Baseload prompt power market limiting the increases driven by the NBP gas market in afternoon trading. The Day ahead contract increased by £8.75/MWh due to gains on the NBP and could have been higher save for strong wind generation 20% above seasonal norm levels. On the curve all contracts stepped higher in the afternoon. The risks impacting on the gas market originating from the Middle East and subsequently on the Ukraine Russia border fed through to baseload power. The front month gained £2.60/MWh, and the front season added £2.35/MWh day on day with both the September and Winter-24 contracts having traded lower in the morning.  

Oil Market

Following the declines late last week and on Monday due to the run on global stock markets, oil prices showed some minor recovery Tuesday before bouncing back strongly during trading on Wednesday. The Brent crude front month contract which traded as high as $78.87/bbl settled at $78.33 a gain of $1.85 as the crude oil market put the woes of the stock markets behind it and focused on the increased tensions in the Middle East. Market analysts and governments are anticipating further escalation that could culminate in a war between Israel and Lebanon which could hamper oil production in the region. Also adding to the upward pressure was news that crude inventories had fallen in the US indicating demand was outstripping supply in the world’s largest consumer of oil.