Crude oil prices continued to creep higher despite ongoing demand destruction due to coronavirus restrictions

17 December 2020

 Increased optimism over a Brexit trade deal saw gas futures adjust lower to break a 6-day rally

The UK gas system began the day in surplus yesterday but a surge in heating demand negated a drop in gas-fired generation demand as wind generation rose to 12GW. As demand increased the system fell short by the close of business but prompt gas prices retained early losses. Increased optimism over a Brexit trade deal saw gas futures adjust lower to break a 6-day rally which had seen prices increase by around 15% over the 6 day period. The front month shed 2.34p and Q1 21 was down 2.18p while the Calendar Year 21 fell by 1.52p.

 

GB baseload power futures moved lower in tandem with falling gas and carbon prices

GB baseload power futures moved lower in tandem with falling gas and carbon prices on Wednesday. The front month contract shed £0.95/MWh to back off the £60.00 mark while Q1 21 was down by £1.65/MWh. EU ETS unit prices fell by 40 cent to settle between €31.60 and €32.35 per tonne. The day ahead contract moved marginally lower as wind generation met forecast levels of 12GW yesterday. Wind availability is forecast to remain robust for the remainder of the week but is not expected to reach the levels seen on Wednesday.  

Brent crude gained 32 cents to settle at a 9-month high

Crude oil prices continued to creep higher despite ongoing demand destruction due to coronavirus restrictions. Brent crude gained 32 cents to settle at a 9-month high of $51.08 a barrel. US benchmark oil prices closed higher for a third straight session and at their highest price since late February, settling 20 cents higher day-on-day at $47.82 a barrel. The rise in the U.S. benchmark price came on the back of a 3-million-barrel decline in U.S. crude stocks last week. The 15 million barrel increase in stock levels for the previous week still left U.S. stocks at near record highs of over 500 million barrels.    

Carbon prices have gained overnight

Lower LNG send-out has seen the UK gas system forecast 16MCM short today as demand remains steady. Overall demand is forecast at 262MCM with lower heating demand countered by a rise in gas-fired power demand as wind generation has fallen slightly to 10GW. Despite the system deficit, day ahead gas has eased with Friday’s price down by 0.80p as demand is expected to fall off heading into the weekend. Gas futures continue to adjust lower with the Q1 21 contract down by a penny. The slow shift higher on the oil market continues with Brent up 55 cents to $51.63. Carbon prices have also gained overnight with EU ETS unit prices trading above €32.00 per tonne.