Brent crude has recovered a little in early trading

UK gas system ran in surplus for most of the trading day on Friday

The UK gas system ran in surplus for most of the trading day on Friday but a late dip in Langeled deliveries left the system with a 6MCM deficit at close of business. Summer maintenance on various Norwegian supply sources is likely to see variable delivery to the UK over the month of July. Prompt gas prices recorded losses of over a penny for a second consecutive day as the supply deficit only became evident at close of business. Following 2 days of easing, gas futures prices firmed slightly on Friday but all remained lower week-on-week. The July contract which expires today was up by 0.29p while the Quarter 3 contract, which also expires today, gained 0.25p to settle at 15.00p even.  

 GB baseload power futures recorded mixed movement

GB baseload power futures recorded mixed movement with the July contract breaking below £30.00/MWh the only remarkable move. The Quarter 3 contract eased fractionally by movement further out the curve was mixed as the gas price increases were countered by falling carbon prices on the day. The day ahead baseload contract shed £3.50/MWh as wind generation was forecast to surge to over 10GW on Monday. Demand was also forecast lower for today as air-conditioning demand falls off with lower temperatures forecast for this week.  

 The market mood was tempered by fresh lockdown measures

Crude oil prices steadied on Friday as the market weighed strong compliance on production cuts within OPEC and Russia against falling demand in the U.S. due to renewed lockdown. West Texas Intermediate shed 23 cents to settle at $38.47 a barrel, while Brent crude was down by 3 cents to settle at $41.02, or $1.17 a barrel lower week-on-week. The market mood was tempered by fresh lockdown measures as the U.S. reported a record number of new Covid-19 cases in many states. The fact that Covid-19 is still a threat to economic activity is likely to play on the market for some time yet.  

 Crude has dipped below $40.00 a barrel on Asian markets overnight

Crude has dipped below $40.00 a barrel on Asian markets overnight as the market fears renewed demand suppression due to rising coronavirus infections in many countries, especially the U.S. Brent crude has recovered a little since London began trading and is currently marked up at $40.15 a barrel. As wind generation is forecast at over 10GW for today, or double Friday’s contribution, demand on the UK gas system is well below the seasonal norm. Despite restricted Norwegian deliveries due to maintenance, the system is currently forecast 15MCM long. The spot price at the NBP is down slightly but day ahead and near futures gas prices are showing marginal gains.