Baseload power futures declined across the board on lower gas and carbon cost

18 November 2020

The UK gas system operated with a surplus and line pack was expected to grow by some 14MCM by the close

As mild weather continued across the UK and Ireland forecast gas demand reduced day on day to just 195MCM.  The UK gas system operated with a surplus and line pack was expected to grow by some 14MCM by the close.  The more positive fundamentals came about as a result of increased wind generation and a reduction in distribution/heating demand.  The outlook for the rest of the week is forecasting some more seasonal temperatures but nonetheless the positive supply demand balance is expected to be maintained.  UK gas prices opened softer and the decline in premium over the course of the day saw much the increases from Monday’s rally wiped out.  

As with the gas market, GB power fundamentals were positive on Tuesday

As with the gas market, GB power fundamentals were positive on Tuesday and this allowed the market to give up the premium added in the previous session.   Peak demand in the UK topped 40GW and this was well covered by the various sources of generation.  Wind generation peaked at 11GW while imports into the UK via the various interconnectors came in at 4GW.  The day ahead contract gained £0.60/MWh despite forecast higher wind generation for today and the rest of this week.  Baseload power futures declined across the board on lower gas and carbon cost.  On average the power market finished down by £0.85/MWh.

 Crude oil markets seemed to shake off the positive news on potential Covid 19 vaccines

Crude oil markets seemed to shake off the positive news on potential Covid 19 vaccines and once more looked to more fundamental signals for direction.  While the positive news on both the Pfizer and Moderna gave the market, some cause for optimism and caused some uplift in pricing, yesterday’s market saw some of this premium fade away.  The continuing climb in cases across the globe and in the increasing restrictions in the U.S. in particular has caused the crude market weaken.  While demand has improved in recent times it is still well below where it needs to be to provide a positive signal to the market.  

Gas futures contracts have opened weaker and premium is being lost across the board

The supply/demand balance in the UK gas market remains on par with yesterday and the system is showing a surplus of 12MCM on a forecast demand of 189MCM.  High levels of wind generation continue to suppress demand from the conventional gas generation sector while mild weather keeps heating demand low.  On the NBP, gas futures contracts have opened weaker and premium is being lost across the board.  The front month December contract is already down by 0.39p at 39.01p.  Likewise, Summer 2021 is priced at 32.99p, down by 0.30p from last night’s close.  Crude oil markets have recovered some of the losses from yesterday as Brent trades at $44.18 a barrel. Page