Tightness on the oil market was again in evidence on Friday
13 July 2020
UK gas prices saw a third consecutive day of lossesDemand on the UK gas system fell-off on Friday as wind generation picked up and commercial demand fell heading into the weekend. UK gas prices saw a third consecutive day of losses with prompt and near futures contracts again leading the decline. The prompt market was led lower by a well-supplied system which maintained a 10MCM supply surplus for most of the trading day. Within day and day ahead prices shed a penny per therm while the front month was down by 0.84p. While the Winter 2020 contract shed 0.55p, losses on seasonal contracts further out the curve averaged just 0.25p.
Baseload power futures moved in line with their gas counterpartsBaseload power futures moved in line with their gas counterparts shedding value for a third day in a row on Friday. The front month contract shed £1.25/MWh despite a rebound in carbon prices and further gains on the oil market. EU ETS unit prices for 2021 and 2022 moved closer to €30.00 per tonne. Prompt power contracts were down also as higher wind generation levels averaging 5GW are forecast for today and the rest of this week. The forecast arrival of 2 fresh shipments of LNG this week ensured prompt gas prices remained under downward pressure.
The recent tightness on the oil market was again in evidence on Friday as Brent crude recovered almost all of Thursday’s loss and the global bench-mark finished just 44 cents higher week-on-week. Friday’s increase came following news that Saudi Arabia is considering reducing its production cuts from 9.7 million barrels per day to 7.7 mbpl from August 1. Week-on-week movement in U.S. crude prices was equally constrained as West Texas crude moved above $40.00 a barrel again on Friday as drilling activity in the U.S. fell to an 11-year low. The U.S. market was also supported by a bounce in stock market prices on the day.
Saudi Arabia is considering reducing its production