Natural gas, crude oil and EUA carbon contracts traded higher during the day on Wednesday

12 November 2020

UK gas system continued to reflect the mild temperatures

The UK gas system continued to reflect the mild temperatures that prevail over the UK and Ireland with gas forecast demand remaining low a 208MCM.  The system was generally comfortable throughout the day and despite tightening of the supply/demand balance, line pack still grew by 4MCM.  Langeled flows from Norway continued to be robust and delved a consistent 74MCM into the UK system over the course of the day.   On the market gas prices failed to establish any real new direction and ranged between small gains and losses over the course of the day.  At settlement, contract had not moved to far from previous closing positions with price movement ranging between 0.10p and 0.30p.  

GB baseload power future contracts rose in sympathy with the broader energy complex

GB baseload power future contracts rose in sympathy with the broader energy complex which took on a bullish feel as optimism about a coronavirus vaccine grew.  Natural gas, crude oil and EUA carbon contracts traded higher during the day on Wednesday and these gains fed directly into the power curve.  However, the carbon market failed to hang on to the early gains and This market reversed track just before the close to post some minor losses of 10 cents.  Closer in, the day ahead contract eased slightly as the system remained comfortable on high levels of renewable power.  At the close, day ahead was priced at £41.85/MWh, down by £0.40.  

Crude oil prices extended gains for the third session in a row

Crude oil prices extended gains for the third session in a row as new data on U.S. inventories from the EIA suggested a big decline in U.S. stocks.  In addition, the report also indicated that stockpiles of gasoline and other fuels registered big falls.  Because of Veterans Day in the U.S. the official report will not be issued until today.  Crude is riding high and achieved its highest closing price since September as the impact of the imminent coronavirus vaccine buoys the market.  There is also no doubt that the political uncertainty over the outcome of the U.S. election is adding some risk premium as well.  At settlement, Brent crude was up by 65 cents at $42.26 a barrel.

Demand on the UK gas system has declined day on day

Demand on the UK gas system has declined day on day and is currently being forecast at 200MCM.  This figure is still below the seasonal norm and is reflecting both the relatively warm weather and generally favourable conditions for wind generation.  Flows via the Langeled pipeline remain high at 78MCM while there is no requirement for storage supplies, which remain at zero flows.  On the gas market some contracts have ticked up in early trading with the front month adding 0.15p as December trades at 39.95p per therm.  The Summer 2021 contract has also added premium as it trades at 34.45p, up by 0.24p.  Crude oil prices are rangebound as we await the delayed weekly inventory figures.