A tight GB gas system along with increased geopolitical risk provided the upside to gas prices on Thursday

Gas Market  

The cool temperatures combined with the recent escalation of the Russian Ukraine war brought another volatile session for the gas markets on Thursday.  GB gas demand rose to 327mcm yesterday, the highest of the current winter so far and supplies lagged demand despite high LNG send out.  LNG facilities in the UK and the Netherlands have been emptying reserves this week to make room for impending deliveries as up to 6 cargoes are expected at UK ports by the end of the month while Dutch ports are expecting 4 shipments.  Prompt prices for the NBP rose sharply through the day with the Spot adding 4.90p per therm while the Day ahead product settled 4.05p higher.  On the curve, contracts out to next summer ended the day almost 4.00p higher yesterday.    

Power Market

After a relatively flat day on Wednesday the GB baseload power market took off again yesterday with higher gas and carbon prices feeding into the afternoon rally.  The December contract added £1.80/MWh, however, the Quarter-1 contract posted the highest gain of the day after settling £4.05/MWh up at £103.50/MWh.  Wind speeds are expected to pick up from Friday which limited the gain for the Day ahead contract to £2.76/MWh yesterday. Carbon prices rallied to a 12-week high in the slipstream of the sharp gains witnessed in gas markets yesterday.  EUA contracts out to 2026 were up by over 3.0% or an average of €2.24 per tonne and the Dec-25 contract settled at €72.79 per tonne. 

Oil Market

The escalation in the conflict between Russia and Ukraine was behind the increases in crude oil prices yesterday.  Mr. Putin flexed some muscle in response to the U.S. providing longer range missiles to Ukraine troops and approved the launch of an intercontinental missile on Ukraine yesterday.  This has lifted the war to a new level and raised fears that these weapons could strike European energy infrastructure.  Brent for January delivery rose by $1.42 and settled at $74.23 a barrel which is just below the 50-day average.  Elsewhere, China has announced new measures to boost trade ahead of possible tariffs on exports to the U.S. which could be introduced by President Elect Donald Trump and there are rumours that OPEC+ are considering deferring proposed production increases for another month.  

Markets this morning

The GB gas system is looking in better shape this morning with demand forecast a touch lower as temperatures are expected to increase going into the weekend. Supplies are showing a surplus of 14mcm over the demand for today with LNG send out nominated at 74mcm.  Trading for the prompt has been thin with just the Day ahead product active and is down 1.70p per therm.  NBP futures are struggling to hold early gains as the latest trades for the front months are close to a penny above last nights close. In the crude oil markets, Brent is trading 21 cents a barrel higher while the President Putin has warned Russia may retaliate against countries supplying weapons used to target Russia.