WEEKLY ENERGY MARKET UPDATE -14/03/2022

Last Week’s Pricing & Commentary  

Last week saw prices return to some sense of recent normality after a blockbuster move higher on Monday saw front month gas hit 800p/therm (c. 27p/kWh) by 8am. The market had gone from discussing how high c. 200p/therm had been in recent months to only go and see front month gas trade in a near 300p/therm range within day. The move was sparked by fears over whether Russian gas supply to Europe would remain and set a volatile tone for the week. Tuesday saw a c. 200p/therm trading range on the Apr 22 NBP contract, with prices truly erratic and often headline driven although some moves had traders and analysts alike scratching their heads. Apr 22 NBP finished the week 149.21p/therm lower, likely helped by news of Russian flows actually increasing to Europe towards the end of the week. Power prices largely moved in line with gas, Apr 22, Summer 22. and Winter 22 baseload dropped by £99.74/MWh, £89.95/MWh and £26.93/MWh, respectively. Oil prices were also hindered by bearishness entering the market as gas and power prices began to trade back to recent pre-war levels. May 22 Brent dropped $5.44/barrel over the course of the week, sinking away from highs of c. $130/barrel at times during the week. Carbon was the outlier last week with buyers emphatically stepping back into the contract on Tuesday as Dec 22 EUAs traded in a c. €13/tonne range and gained €10.21/tonne from the prior day, a strong reversal from the recent trend. The contract gained €11.66/tonne by the end of the week and helped to see Dec 22 UKAs jump £4.19/tonne higher too.

This Morning’s View

This morning has seen gas open bearishly with TTF and NBP falling below settlement as some cautious optimism seems to have entered the market with talks ongoing over the weekend through to this week to see if a diplomatic resolution to the war in Ukraine can be found. With this said, Russian activity in Ukraine hasn’t lessened or even really stagnated so volatility is likely to be a mainstay in the market. Apr 22 NBP is down c. 31.06p/therm, giving up 300p/therm early on as prices begin to edge back towards to their recent trading range before war broke out in Ukraine. Oil prices are also hampered by the ongoing talks between Russia and Ukraine seeing May 22 Brent give up $110/barrel to currently sit $3.65/barrel below settlement. Carbon, on the other hand, continues its recent trip higher as traders seemingly eye €80/tonne. The Dec 22 EUA contract is up c. €2.21/tonne this morning, potentially providing some counterbalance to power which is being led lower by the weakness in gas.

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