The recent oil price rally has abruptly halted

UK gas system enjoyed a healthy supply surplus on Friday

Having been under-supplied on Thursday, the UK gas system enjoyed a healthy supply surplus on Friday. Mild weather and strong wind generation levels saw demand drop below 240MCM and the system ran a supply surplus averaging 15MCM over the trading day. Following 2 days of losses, UK gas futures reversed direction on Friday, recording modest gains which left prices more-or-less unchanged week-on-week. Q1 21 was up by 0.33p but seasonal contracts beyond Summer 21 saw some stronger increases on the day, gaining an average of 0.67p. The spot gas price fell by 1.65p while day ahead gas for today was down by 1.75p and week ahead for this week eased by 1.30p.    

EU ETS unit prices shed €0.86 per tonne

GB baseload power futures recorded only marginal movement on Friday as rising gas prices were countered by falling carbon prices on the day. The Q1 21 contract finished £1.20/MWh higher week-on-week and Summer 21 was up by £1.30/MWh. EU ETS unit prices shed €0.86 per tonne to finish in a range between €31.00 and €31.50 per tonne. The day ahead contract gained almost £2.00 but the full week ahead contract was down by £1.75/MWh as demand is forecast lower this week with temperatures above normal and a forecast for reasonably strong wind generation over the week.  

Prices rose by just over 5% week-on-week with Brent finishing at $52.26

The steady rise in crude oil prices continued on Friday as both Brent and West Texas Intermediate rose to fresh 10-month highs. Prices rose by just over 5% week-on-week with Brent finishing at $52.26 and WTI at $49.10 a barrel. The prospect of a fresh economic stimulus in the U.S. and increased optimism for demand recovery as vaccines are rolled out are underpinning the recent rally. Prices are now reaching levels which will make more shale oil plays viable but any sudden upturn in output could upset the delicate supply-demand situation in the short term. U.S. drilling activity saw a modest increase of just 5 rigs last week.    

Demand on the UK gas system is forecast some 40MCM below the seasonal norm for today

Demand on the UK gas system is forecast some 40MCM below the seasonal norm for today and the system is currently forecast 8MCM long. The new strain of coronavirus spreading in the south of England has forced the UK Government to impose stronger restrictions and travel bans. This, and the ongoing impasse in Brexit talks, has caused the pound to slip lower and UK gas futures are rising as a result. The front month contract has gained 1.78p and Summer 21 is up by 0.85p. The recent oil price rally has abruptly halted, and Brent crude is down by over $2.00 on Friday’s closing price and is currently trading at just over $50.00 a barrel.