Lower gas and carbon prices helped pull GB baseload power futures lower on Monday

08 December 2020

Prompt gas prices eased as the market was encouraged by the healthy supply-side response

Elevated heating and power generation demand drove overall demand on the UK gas system to a high of 360MCM yesterday. Gas-fired power demand topped 100MCM as wind generation slumped. There was a strong response from the supply side with an early surplus of 8MCM maintained throughout the trading day. LNG send-out increased to 96MCM which was topped only by Norwegian imports on the day. Prompt gas prices eased as the market was encouraged by the healthy supply-side response with spot and day ahead contracts falling by 1.65p and 1.40p. Near futures contracts also eased on Monday, but movement was marginal with Q1 2021 giving up 0.35p.  

Prompt power contracts returned to near normal levels yesterday

Prompt power contracts returned to near normal levels yesterday following the spike in prices on Friday. The forecast surge in demand and slump in wind generation were evident from the start. Gas-fired plant supplied up to 56% of demand during the trading day as renewable generation fell below coal in the generation stack, although wind did pick up in the evening. Lower gas and carbon prices helped pull GB baseload power futures lower on Monday with the front month shedding £1.20/MWh. EU ETS unit prices shed 50 cent with all except the 2022 contract settling below €30.00 per tonne again.

The surge in coronavirus cases in the U.S is causing a further decrease in oil demand

The surge in coronavirus cases in the U.S. and the consequent lock-down in many States is causing a further decrease in oil demand. This is true of many European countries also and the lower demand is putting some downward pressure on oil prices. Brent crude fell by 46 cents yesterday while the U.S. benchmark, West Texas Intermediate, was down 50 cents to $45.76 a barrel. Market attention will focus closely on weekly inventory data due today and tomorrow which should reveal the extent of the latest demand destruction. The markets are also awaiting news of a new U.S. economic stimulus package

 

The carbon market has recovered around half of yesterday’s losses

A modest increase in temperature and increased wind availability has seen demand on the UK gas system fall below 350MCM. Wind generation has increased to 5GW but gas-fired plant is still delivering just over 50% of GB power demand this morning. Forecast deliveries are running 24MCM long leading to a further easing of prompt gas prices while near futures are also down marginally on last night’s closing levels. Crude oil prices are little changed overnight. The carbon market has recovered around half of yesterday’s losses with contracts trading around the €30.00 per tonne mark again.