Ongoing weakness in carbon prices

Demand on the UK gas system remained above the seasonal norm

Demand on the UK gas system remained above the seasonal norm on Friday, but deliveries ran ahead of demand throughout the day. The UK gas market finished the week on the up with a third consecutive day of gains, pushing week-on-week gains on near futures contracts higher. The gas price rally continued despite a reversal in crude oil price movement with contracts for the current winter months gaining an average of 0.90p. Despite the well-supplied system, spot and day ahead prices gained 0.50p while the week ahead and balance-of-month were up by a penny to align with the front month contract.  

GB baseload futures tracked UK gas price movement

GB baseload futures tracked UK gas price movement on Friday with significant gains recorded on contracts for the current winter months. The front month saw the biggest increase, gaining £1.55 to settle at £50.80/MWh. Gains further out the curve were limited by the ongoing weakness in carbon prices which fell to their lowest level since late June. The day ahead contract fell heavily as Thursday’s short supply notice was withdrawn. The day ahead price for today shed £15.00 to settle at £45.55/MWh. The week ahead baseload contract for this week gained £1.40 to $45.15/MWh on forecast lower wind availability.    

Crude oil slipped marginally lower again

Crude oil slipped marginally lower again on Friday to finish virtually unchanged week-on-week. Brent crude shed 23 cents to settle at $42.93, just 8 cents a barrel up on the previous Friday’s settlement price. West Texas Intermediate was down by just 8 cents to $40.88 a barrel. The market is now concerned about global demand as the resurgent infection rate of Covid-19 has more countries considering the reintroduction of lockdown measures to stem the spread of the virus. Carbon prices finished the week at their lowest level since late June with EU ETS unit prices for next year trading below €25.00 per tonne  

Forecast demand on the UK gas system has fallen below the seasonal norm

With increased wind generation and no storage injection this morning, forecast demand on the UK gas system has fallen below the seasonal norm. The system is currently forecast 12MCM long, but prompt gas prices continue to strengthen. Within day and day ahead prices are up by 0.35p and 0.40p in early trading. With high wind levels forecast for the next 2 days, gas-fired power generation demand should remain relatively low. Increased wind-chill will drive heating demand higher however and we expect overall demand to exceed the seasonal norm tomorrow. Crude oil has eased a little further in early trading and remains below $43.00 a barrel.