Crude oil prices have doubled since March

Weakening pound sterling helped prices move higher

Wind availability fell off on Friday leading to higher gas demand with increased CCGT plant online. With low wind forecast for this week, the week ahead contract gained 0.90p but prompt and front month prices remained below 13.50p. A weakening pound sterling helped prices move higher but while prompt and near futures gas prices recorded gains, the outcome for contracts for Q4 20 and beyond was a mixed basket of marginal gains and losses. The recovery of some of Thursday’s heavy losses in emissions prices was partly offset by modest losses on the oil market for a second consecutive day.  

 Day ahead baseload power eased marginally

GB power futures began the day under downward pressure on Friday but as carbon began to recover from Thursday’s slump, losses on the power market reduced. The front month contract was virtually unchanged day-on-day but was down by £1.00/MWh week-on-week. EU ETS unit prices recovered half of the previous day’s losses, gaining an average of €1.15/tonne on Friday. Day ahead baseload power eased marginally despite forecast lower wind generation levels. Wind generation is forecast at just 2GW today but is expected to gradually increase to over 5GW by the end of the week.  

The decline in U.S. production is a direct result of the slump in price

Crude oil continued to trade in a narrow range on Friday with Brent crude finishing 23 cents down on the day and a mere 10 cents lower week-on-week. Crude oil prices have doubled since March but the recovery has been underpinned by stringent production cuts agreed by OPEC and it’s allies on the one hand, and by falling U.S. production on the other. The decline in U.S. production is a direct result of the slump in price, which has rendered many shale oil operations uneconomical. The slower-than-anticipated recovery in U.S. economic activity and the ramping up of tensions between the U.S. and China have slowed oil demand recovery and OPEC may well have to delay any reduction in production cuts.  

 Brent crude is currently marked up at $42.75 a barrel

Demand on the UK gas system is running some 12MCM above the seasonal norm today, but forecast and physical flows are matching or slightly ahead of demand. The supply mix is generally unchanged from last week with Norwegian deliveries contributing the largest share. The UK gas market is typically slow to trade on the prompt but near futures contracts are up and running with the front month traded at 12.75p which is 0.67p down on Friday’s closing level. The Winter 20 contract is down marginally in response to a further easing in crude oil prices. Brent crude is currently marked up at $42.75 a barrel.