Baseload power futures declined again on Friday

 Demand on the UK gas system declined heading into the weekend

Demand on the UK gas system declined heading into the weekend and was running 12% below the seasonal norm on Friday with the system comfortably supplied throughout the trading day. Despite the solid supply-demand balance, prompt gas prices gained on the day with the day ahead contract for today up by 0.55p and the week ahead for this week gaining 0.70p. Thursday’s minor decline in gas futures prices proved to be a brief interruption of the week’s otherwise upward trend. The front month gained 1.22p on the day, to finish almost 10% higher week-on-week while the Winter 2020 contract gained half that amount on the day to finish 1.39p higher week-on-week.

Prompt power products will be highly susceptible to gas price movement

Baseload power futures declined again on Friday as falling carbon prices outweighed gains on the UK gas market. Despite gains averaging over 0.50p on seasonal gas contracts, the corresponding power products were down by £0.25/MWh as EU ETS unit prices slipped by a further 50 cent on Friday. The day ahead contract jumped by £8.00/MWh on forecast lower wind and higher demand for today. Expectations for renewable generation are low for the full week and with nuclear capacity restricted, prompt power products will be highly susceptible to gas price movement.  

U.S. crude prices gained fractionally on the day, Brent crude eased by 15 cents to settle at $43.15 a barrel

Reports from OPEC sources on Friday suggested that the cartel is prepared to stick with reduced production quotas for the duration of the Covid-19 pandemic. The news came as something of a surprise to the market as recent reports suggested that some OPEC members were seeking increased production limits. The increase in Covid-19 cases in many parts of the world suggest that demand will remain subdued for longer than anticipated however, and the OPEC response is merely a recognition of this reality. While U.S. crude prices gained fractionally on the day, Brent crude eased by 15 cents to settle at $43.15 a barrel.  

Carbon trades are indicating some modest gains

As temperatures begin to fall off, demand on the UK gas system is coming close to the norm for this time of year. The system is forecast 8MCM long today as Langeled deliveries have risen to over 40MCM this morning and storage withdrawals are running at 30MCM. Prompt contracts have yet to trade and near futures traded so far are showing marginal gains. Carbon trades are indicating some modest gains following last weeks loss of over €2.50 per tonne. Crude oil prices are moving in the opposite direction however with Brent crude down by 65 cents to currently trade at $42.50 a barrel.