Near curve NBP gas contracts fell by an average of 3.0% on Tuesday as Russian gas continued to flow

Gas Market 

Gas prices declined in trading Tuesday as Russian gas continued to flow into Europe despite the announcement over the weekend that Gazprom would curtail flows into Austria. Reports show that nominations for Russian gas to flow through Slovakia to the Austrian border continue, but the counterparty on the Austrian side of the border is no longer OMV but a western European counterparty with contracts to transport gas via the Austrian system. As a result gas flows into Austria have remained little changed from last week. With gas flows remaining consistent, some of the risk premium has been released from contracts despite the current cold snap supporting demand. The front month contract fell by 3.3% to 114.74p/th marginally higher than the intra-day low of 114.31p/th. Day ahead declined by 3.45p/th with the increased heat demand offset by above seasonal norm wind generation reducing gas for power generation.

Power Market

Wind generation in the UK is currently forecast at 13.6 GW, almost 20% above seasonal norms, which weighed on the Day ahead baseload power contract as it shed £3.00/MWh settling at £99.00/MWh. Along the curve Q1-25 prices fell by over 2.5% as the declining NBP gas market weighed on the power contracts. The continued flow of gas from Russia despite the previously announced curtailment of flows into Austria saw some of the recent risk premium fall out of the NBP, and as a result a similar trend was evident on the GB baseload market. EUA carbon prices also declined, with a lack of clear signals in the allowances market, the contracts instead tracked European gas prices lower.  

Oil Market

Despite rising tensions following claims by Russia that Ukraine had used US long range ATACMS missiles to attack military targets, prices steadied in trading on Tuesday. Weighing on prices was news that Western Europe’s largest oil field, the Johan Sverdrup field, recommenced operation following Monday’s power outage that had contributed to a 3% increase. Another contributing factor outweighing geopolitical risks was the strong US dollar that edged higher on Tuesday. At its current level the dollar is only marginally below its strongest valuation seen in the last 13 months which helped oil hold firm at $73.31/bbl despite the rising tensions in Ukraine. A strong dollar weighs on oil prices making it more expensive for holders of other currencies.  

Markets this morning

NBP gas prices have arrested their decline this morning following yesterday’s decline. On a day ahead basis tomorrow’s temperatures are forecast to be the coldest of this short cold snap before an increase in temperatures over the weekend. The Dec-24 contract last traded at 115.32p/th relatively flat to last night’s settlement. Oil is also trading relatively flat to Tuesday’s settlement as the market weighs up mixed drivers. Traders are weighing up the risk of Ukraine’s attacks on Russia possibly impacting on oil production and signs of increased Chinese oil imports against an increase in US stockpiles indicating a downturn in US demand.