First increase in U.S. drilling activity since March
27 July 2020
Falling demand left the UK gas system over-suppliedUK gas contracts responded to another drop in carbon prices on Friday, retracing some of the gains of previous days and leaving only the front month higher week-on-week. The August and September contracts eased fractionally but seasonal contracts shed up to 0.69p on the day leaving them between 1.11p and 2.45p lower over the week. Falling demand left the UK gas system over-supplied for much of the day on Friday and prompt gas prices eased as a result. The spot price fell by a penny while the day ahead and week ahead contracts shed 0.78p and 0.75p as the supply-demand outlook remains positive with 3 more LNG cargoes due to discharge at UK terminals in the coming week.
Downward move in gas prices was further abetted by falling carbon pricesThe downward move in gas prices was further abetted by falling carbon prices to pull GB power futures lower on Friday. The front month contract held fractionally above £30.00/MWh at the close while the front winter settled at £44.25/MWh or £1.60/MWh lower week-on-week. EU ETS unit prices shed almost a dollar on the day to finish in a range of €26.30 to €27.30 per tonne. A modest increase in the day ahead gas was enough to send day ahead baseload power higher despite a forecast for increased wind generation today. The full week ahead contract for this week eased slightly however as wind generation is forecast to average around 1GW higher week-on-week
A further fall in oil prices due to the growing tension between the U.S. and China was outweighed by another downturn in the U.S. dollar exchange rate on Friday. Crude oil prices stabilised again after Thursday’s loss of almost a dollar a barrel and the global benchmark, Brent crude, gained just 3 cents on the day and was up just 20 cents week-on-week. The U.S. benchmark finished 20 cents higher day-on-day at $41.29 and 53 cents higher week-on-week. This week saw the first increase in U.S. drilling activity since March, but with demand recovery slowing, any increase in production is likely to put downward pressure on prices.
Fall in oil prices due to downturn in the U.S. dollar exchange rate