Coronavirus cases in China impacting oil market
22 June 2020
Gas prices strengthened for a third consecutive dayGas 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 slightlyGB 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.
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.
OPEC reported generally good compliance with agreed production cuts