Coronavirus cases in China impacting oil market

Gas prices strengthened for a third consecutive day

Gas prices strengthened for a third consecutive day on Friday as LNG send-out declined. Weak European gas prices have seen LNG shipments from the U.S. cancelled and only 2 further deliveries from Qatar are forecast for the remainder of the month. Despite a slight fall-back on the carbon market, EU ETS unit prices remained between €24 and €25 per tonne on Friday, providing further support to gas prices. The Q3 gas contract gained 0.44p but the Winter 2020 contract was up by 0.79p on the day and by almost 2.00p week-on-week. The day ahead contract gained 0.35p, any further upside being tempered by a forecast for higher wind generation on Monday.  

 EU ETS unit prices eased slightly

GB baseload power futures recorded further gains on Friday with support from the wider fuels complex and emissions prices. Gas and oil prices strengthened day-on-day and while EU ETS unit prices eased slightly, they remained between €24 and €25 per tonne. The front month finished £2.05/MWh higher week-on-week while Winter 2020 was up by £2.25/MWh. The day ahead baseload price gained £0.70/MWh despite a forecast for higher wind generation for Monday. Wind accounted for just under 6GW on Friday and is forecast to rise to 10GW today with an increase in solar generation also forecast.  

 OPEC reported generally good compliance with agreed production cuts

Crude oil prices moved higher again on Friday as OPEC reported generally good compliance with agreed production cuts. Russia was also reported to be sticking to its reduced production target while U.S. shale oil production has continued to fall. Other factors impacting the oil market at present are the re-emergence of coronavirus cases in China and an ongoing rise in cases in some U.S. states including Florida. Brent crude gained 68 cents on the day to settle at $42.19 a barrel, almost 9% up week-on-week. The U.S. benchmark, West Texas Intermediate, traded above $40.00 intra-day before settling at $39.75, its highest settlement price since early March.  

 Brent crude has gained 16 cents in early trading

A big increase in wind powered generation sees gas demand on the UK system down considerably on last week’s levels. Demand is forecast at just 152MCM for today and forecast deliveries are currently forecast at 189MCM. The low demand is more remarkable given exports to Belgium are nominated to exceed 30MCM today. The within day price is down 0.80p and futures contracts have also opened lower this morning despite sustained strength in oil prices. Brent crude has gained 16 cents in early trading and is currently marked up at $42.35 a barrel while EU ETS unit prices continue to trade between €24 and €25 per tonne.