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Markets Crash Over the last three days

Perhaps the day we have been waiting for a while is now unfolding, as the markets crash quite drastically over the last three days from the record breaking highs. The stock market took its turn first this week, then crypto currencies and now commodities are trying not to miss out in being part of an eventful week.

What has led to the shift in momentum in the gas and power markets? Firstly, gas demand has dropped off over the last few days, allowing the opportunity of storage injections. Last week, UK gas storage levels were at a worrying 5% capacity, but fast forward to today, they are now sitting at 11%. Still low, but the outlook for next winter suddenly looks more optimistic.

Next EUA carbon permits, which has so often been inflating prices by going nothing but up since November has seen a sharp selloff, with a degree of profit taking and speculation on the UK’s own carbon auction taking place. It closed at €49.68/t, down from its highs of €56/t. Brent has also been coming under pressure from the situation in India again with reports of a 15 to 20% drop in fuel sales, and the possibility of additional barrels from Iran coming online.

Finally, a factor this morning still to play out is news the US which has lifted sanctions against Russia on the completion of Nord Steam 2, a gas pipeline over 95% complete, which will run directly into Germany, and supply Western Europe. The change of stance from the US, admittedly with a new president now, comes after cyber criminals, who the US government say were Russian based, took a major American pipeline offline earlier this month, leaving thousands on the East Coast without fuel. Read into that what you will, but the suggestion is Biden may be looking to repair political relationships with the U-Turn.