WEEKLY ENERGY MARKET UPDATE - 10/10/2022

Last Week’s Pricing & Commentary  

The one commodity that defied the weak close to the week was Brent crude, which off the back of OPEC+’s production cut announcement saw its Dec 22 contract rally 8.74% closing in on $100/barrel again. OPEC+ is set to slash production by 2 million barrels a day, leading to fear in the west that this will result in even tighter oil supplies over the winter period. The only real winner of this production cut announcement is Russia, who due to the fact that they are already producing less barrels than target, won’t have to reign in their production but will benefit from the increased oil prices. The EC announced towards the end of last week that they were closing in on a consensus agreement with regards to a gas price cap to help countries tackle the winter energy crisis. However, EFET criticised the premise, asserting that a price cap would merely result in supplies, particularly of LNG, being diverted to Asian markets where a price premium would end up being paid. Furthermore, EFET stated that “the price cap the gap between supply and demand and will lead to more rationing”. The French nuclear fleet remains only 50% operational, due to a combination of planned and unplanned maintenance works. This has been putting pressure on supply across Europe, yet the mild temperatures and unusually high wind generation weighed on the curve. Within power markets, gas supply concerns will remain the dominant driving force behind curve direction which will keep the risk premium high in the prompt markets.

Last Week’s Average Generation Stack

This Morning’s View

The announcement regarding whether or not the EC do decide to enforce a gas price cap will be a key fundamental that could emerge this week. Power and gas prices seem to be recoupling, with NBP prices once again being a good early indicator of the direction UBL is likely to move. Finally, providing the mild weather holds up this week DA prices should remain slightly bearish.

Wider news

Spain's gas imports rise 3.3% in August from the same month a year earlier | Reuters

FTSE 100 falls as Kyiv explosions spark risk-off mood | Reuters

Market Report Disclaimer

The information provided in this market report is intended for Brook Green Supply Limited clients and subscribers only. The content is provided and intended for general information purposes only. All pricing stated in this market report is indicative, at the time of writing, and may not be attained in trading at any time after report publication. For the avoidance of doubt, Brook Green Supply Limited does not represent or endorse the accuracy or reliability of any of the information or content, expressed or implied, nor are we acting in any capacity as a fiduciary to you. Recipients of this market report must not rely on the information and are advised to take any necessary steps to validate such information, independently assess the economic risks and merits and make your own assessment, or appoint appropriate advisors, on any legal or tax consequences before acting upon it. Under no circumstances will Brook Green Supply Limited have any liability for any loss or damage caused by dependence on any information contained within this market report. Please contact our execution and solutions desk via tradingdesk@brookgreensupply.com for further information.