Crude oil contracts finished flat as the market tried to determine the outcome of the ongoing OPEC talks.

02 December 2020

 Early trading on the UK NBP futures market saw contracts tick up once again

Having opened with a surplus of 20MCM, an intraday revision to forecast demand saw it move to 316MCM and the system remained in balance from that point on.  Colder weather is expected in coming days, but all the signs are that the UK gas system is well placed to cope with any additional demand.  Early trading on the UK NBP futures market saw contracts tick up once again with January up by 0.90p and the Summer 2021 contract adding just over a penny.  With the supply/demand outlook still looking positive it was not surprising when the market reversed track in the early afternoon.  Prices, for the most part, settled lower with average losses coming in at 0.25p.  

The GB power market broke a five-day winning streak as baseload power contracts declined

The GB power market broke a five-day winning streak as baseload power contracts declined in line with the broader energy complex.  Despite early increased gas contract settled lower while oil, coal and EUA carbon costs all went lower in the day.  CCGT generation was the dominant source on the day with a modest 6GW coming from renewables. The front month January contract declined by £0.38 while February closed at £52.60/MWh, down by £1.30. Volatility on the prompt continues as the day ahead contract closed at £56.85/MWh, adding £6.00 in the process.

 Crude oil contracts traded rangebound and ultimately finished flat

Crude oil contracts traded rangebound and ultimately finished flat as the market tried to determine the outcome of the ongoing OPEC talks on extending production cuts.  Crude oil has been on a surge as of late with expectations being that the Cartel would look to extend production cuts for another number of months.  However, the member of the cartel plus Russia have yet to reach a decision on a three-month extension and this has led to quite a bit of uncertainty in the market.  With no evidence of unanimity emerging, it is likely that a watered-down agreement could be announced at the final session.  At market close the Brent crude contract was priced at $47.60, flat to the previous close.

Demand on the UK gas system is more or less in line with yesterday

Demand on the UK gas system is more or less in line with yesterday and the system is currently operating with a surplus of 15MCM.  Norwegian supplies are coming in at a combined 157MCM and this represents nearly 50% of total supply.  The more positive supply/demand balance is pressuring gas prices and contracts have opened weaker as a result.  The front month January contract is already marked down by 0.50p as it trades at 42.60p per therm.  The Summer 21 contract is priced at 34.00p, down by 0.24p from last night’s close.  Prompt gas prices are also in retreat reflecting the system comfort.  Crude oil prices continue to trade rangebound.