The oil market reacted to new travel restrictions
22 December 2020
UK gas futures for the coming 12 months rose sharplyUK gas futures for the coming 12 months rose sharply over fears for LNG supply in the short term and a weakening pound in the longer term. A forecast cold spell in Japan and Korea for January has seen LNG demand in these 2 major markets increase sharply, leaving the European markets struggling to price-match for shipments. The lack of agreement on a Brexit deal and the emergence of a new Covid-19 variant in the UK has seen sterling weaken further, adding upward pressure on prices. The front month and Q1 contracts both gained over 3.00p and prompt gas prices gained between 4.50p and 5.00p on the day.
The rise in power prices came despite a further easing in carbon pricesGB baseload power futures tracked gas market movement yesterday with the front month gaining £2.10 and Q1 £1.90/MWh. The rise in power prices came despite a further easing in carbon prices. EU ETS unit prices remain above €30.00 per tonne, however. The day ahead baseload power price stepped sharply higher as prompt gas prices gained over 10% on Monday. Lower wind generation levels forecast for today and the remainder of the week saw a greater reliance on increasingly expensive gas-fired generation.
The oil market reacted to new travel restrictions imposed by over 40 countries as a result of the new strain of Covid-19 identified in the UK. The new restrictions will immediately impact the aviation industry and there is no certainty surrounding their possible duration. The steady rise in crude oil prices last week, stemming from optimism over renewed demand as vaccines are rolled out, was abruptly halted on Monday. Crude oil prices fell by over $3.00 intra-day with Brent crude dipping to $49.20 but the global benchmark rallied late-on to settle $1.35 lower at $50.91 a barrel. The U.S. benchmark, West Texas Intermediate, settled $1.33 a barrel lower at $47.74.
Crude oil prices fell by over $3.00 intra-day