Labor Day, is traditionally the end of the driving season and gasoline demand is expected to fall further this week.

07 September 2020

UK gas market ended the week with minor losses on Friday

The UK gas market ended the week with minor losses on Friday, but these were not near enough to outweigh the strong gains of Monday and Thursday. The result was a 5 to 13% rise on near futures contracts week-on-week. The front month recorded gains on 4 of the 5 days last week to settle above 30.00p on Friday, a 3.63p increase over the previous week’s closing level. The UK gas system was comfortably supplied on the day as demand remained well below the seasonal norm, but prompt gas prices gained between 1.00p and 1.20p none-the-less.

The power market movement was generally in line with gas market

GB baseload power futures, with the exception of October and November, eased on Friday but remained higher week-on-week. The power market movement was generally in line with gas market movement on the day but failed to respond to sharp losses on both the oil and carbon markets on the day. On the prompt market, day ahead baseload increased again as wind generation levels were forecast lower for today. While overall power demand remains subdued, the impact of variable wind availability is increased as gas-fired generation becomes the swing provider.  

The decline on the oil markets accelerated on Friday leaving benchmark prices lower week-on-week

The decline on the oil markets accelerated on Friday leaving benchmark prices lower week-on-week for the first time in 6 weeks. Brent crude shed $1.41 to settle at $42.66, down $2.33, or 5% week-on-week. The U.S. benchmark, West Texas Intermediate, shed $1.68 to settle below $40.00 a barrel for the first time in almost a month. The market decline was prompted by a general slump in equities and commodities late last week and was compounded by ongoing weak demand, particularly in the U.S. The long weekend in the U.S. marking Labor Day, is traditionally the end of the driving season and gasoline demand is expected to fall further this week.  

Brent is down a further 60 cents on the London ICE market

Demand on the UK gas system has increased over last week’s levels but the system remains comfortably supplied. Trading on the gas market has been typically slow for a Monday morning with no indicative bid-offer spreads to suggest direction of movement as yet this morning. The supply mix is largely unchanged from Friday with the exception of an increase in deliveries into Bacton from UK North Sea sources. Deliveries via the Bacton Perenco and Bacton SEAL systems, which have been down for maintenance, have returned this morning. On the oil market, Brent is down a further 60 cents on the London ICE market while the U.S. markets are closed for the Labor Day holiday.