A weakening dollar contributed to the week-on-week decline in crude prices

14 September 2020

 As the pound continued to decline, UK gas prices recorded corresponding gains

As the pound continued to decline, UK gas prices recorded corresponding gains on Friday. The limited gains on the day failed to alter the week-on-week losses on the gas futures market where the front month finished 2.53, or 8% lower over the week. Demand on the UK gas system fell as wind power generation increased and the system remained in balance despite Langeled flows falling below 10MCM on the day. Storage withdrawals ramped up over the course of the day to maintain system balance to close of business. Prompt gas prices at the NBP fell by an average of 1.25p.

 The weakening pound maintained upward pressure on power prices generally

With the exception of the front month, GB baseload power futures gained in lockstep with the gas market on Friday. Carbon prices eased slightly on the day, but the weakening pound maintained upward pressure on power prices generally. The day ahead contract recovered £2.00/MWh of Thursday’s heavy loss as wind generation levels are forecast lower for this week.  

 Crude oil prices edged lower again on Friday with Brent crude dropping 23 cents

Crude oil prices edged lower again on Friday with Brent crude dropping 23 cents to settle at $39.83. The global benchmark shed $2.83 a barrel week-on-week. The U.S. benchmark, West Texas Intermediate, was down by just 3 cents to $37.33 a barrel. The main drivers of oil prices at the moment are growing concerns about global economic recovery and the impact that may have on demand. A weakening dollar contributed to the week-on-week decline in crude prices as the greenback fell against the euro and most major currencies apart from the pound sterling.  

 Demand on the UK gas system is forecast below 150MCM for today

Demand on the UK gas system is forecast below 150MCM for today. Deliveries are running in line with normal demand for this time of year, leaving the system 25MCM long at 0900. Supply make-up is generally the same as Friday except that LNG send-out has fallen slightly. A forecast for unseasonably high temperatures this week may see increased power demand for air-conditioning. With wind availability forecast to remain low for the week, gas demand will almost certainly increase. The market has been slow to start this morning with only the front month traded 0.22p up on Friday’s close. Brent crude is fractionally down at $39.74.