A modest increase in crude prices on Friday

A short-lived rise in temperatures saw demand on the UK gas system ease on Friday morning

A short-lived rise in temperatures saw demand on the UK gas system ease on Friday morning. An early surplus on the system was eroded as demand increased over the course of the day but an increase in LNG send-out restored the system surplus by close of business. The prompt market had reacted to the negative balance by midday with increases on within day and day ahead contracts which stuck to market close. On the futures market, Thursday’s sharp downturn was partly reversed as prices for the remainder of the winter months recovered an average of 1.36p and seasonal contracts for Summer 21 and beyond gained an average of 0.65p.

 

Higher gas and carbon prices pushed GB baseload power prices higher on Friday

Higher gas and carbon prices pushed GB baseload power prices higher on Friday. The front month contract gained £2.05 to £55.25/MWh while Q1 21 was up by £2.40/MWh week-on-week. EU ETS unit prices gained over €1.00 per tonne on the day, the 2021 contract price settling at €30.30 per tonne. A forecast for sharply reduced wind generation and tight supply margins saw the day ahead baseload contract spike on Friday. The contract settled at £118.50/MWh while the full week-ahead contract for this week was up by £9.00/MWh to £72.50/MWh.

 

Carbon prices surged above €30.00 per tonne on Friday

Carbon prices surged above €30.00 per tonne on Friday with EU ETS unit prices gaining over €1.00 per tonne on the day. The 2021 contract price settled at €30.30 per tonne as the market grew optimistic of renewed climate commitment by the U.S. under the Biden administration. Crude oil prices rose on the news that OPEC and Russia had agreed to phase out production cuts over the coming 12 months. No detail of the phasing was released but the market has assumed that there would be no immediate reversal of cuts in the first quarter of 2021. The net result was a modest increase in crude prices on Friday as Brent crude gained 54 cents to settle at $49.25 while West Texas gained 63 cents to settle at $46.25.

 

Demand on the UK gas system has risen to its highest so far this winter

Demand on the UK gas system has risen to its highest so far this winter at just over 350MCM. Increased heating demand, as is normal for this time of year, together with a big increase in demand for power generation are driving overall demand. Gas-fired generation is drawing 110MCM as wind generation has dropped to just 2GW and coal-fired plant is supplying more than renewables this morning. The supply-side response has been strong with forecast deliveries at 360MCM. LNG send-out and Langeled flows are both running at over 70MCM. The gas market is viewing the positive supply-demand situation as a healthy sign for system integrity this winter and both front month and Q1 21 prices are down by over a penny. report