GB power futures continued to decline as weak fuel and carbon prices drove the market
03 November 2020
A combination of high wind generation and lower commercial demand led to demand on the UK gas system fallingA combination of high wind generation and lower commercial demand due to Covid restrictions led to demand on the UK gas system falling 50MCM, or 20%, below the seasonal norm on Monday. Despite a modest recovery on the oil market on the day, European gas prices continued to tumble, with prices for the current winter months shedding between 1.30p and 1.50p. The new front month contract for December fell by 1.50p to settle at a 4-week low of 40.00p. As wind generation and temperatures are forecast to fall steeply tomorrow, leading to a sharp increase in gas demand, the day ahead contract gained 1.20p.
The new front month contract for December was the biggest loser of the dayGB power futures continued to decline as weak fuel and carbon prices drove the market lower again on Monday. The new front month contract for December was the biggest loser of the day, shedding £1.35 to finish at £46.65/MWh. Carbon prices were again little changed day-on-day. The day ahead contract more than reversed Friday’s sharp loss, gaining £6.35/MWh on forecast lower wind generation on Tuesday. With lower temperatures forecast for today, demand on the GB power grid is increasing and will pull more expensive CCGT plant into service.
The recent slide in crude oil prices was halted on Monday as the Russian oil minister suggested his country was considering extending production cuts into next year. Prices also got a boost as US equity markets rebounded strongly yesterday despite pre-election nerves. The more significant fundamental market force of supply and demand was the dominant driver on the day, however. As coronavirus restrictions are being extended across Europe, the consequent demand destruction saw prices fall by over 10% last week. Brent crude gained $1.50 as the new front month contract for January settled at $38.97 a barrel yesterday but the upturn may be short-lived.
The recent slide in crude oil prices was halted on Monday