The U.S. benchmark gained on a bullish inventory report from the Energy Information Administration

31 December 2020

Cold weather and poor wind availability across Britain saw heating and gas-fired power demand hit new season-to-date highs

Cold weather and poor wind availability across Britain saw heating and gas-fired power demand hit new season-to-date highs, pushing overall gas demand to almost 350MCM. An early supply deficit was balanced by close of business as LNG send-out from Milford Haven increased during the day and prompt gas prices relinquished early gains to finish little changed day-on-day. On the futures market, the January contract gained 0.31p to expire at 55.82p. Q1 21 gained 0.30p to expire at 54.42p while seasonal contracts along the curve recorded only fractional movement on the day.  

 The day ahead baseload power price fell by 10% as supply margins improved slightly

GB baseload power futures tracked movement on the gas market yesterday but the January contract, which expires today, was unmoved at £68.00/MWh. Q1 21, which also expires today, recorded the biggest gain, up £0.35/MWh while seasonal contracts for Summer 21 and beyond recorded similarly modest gains. The day ahead baseload power price fell by 10% as supply margins improved slightly, despite demand of over 43GW yesterday. Wind generation levels are forecast slightly higher today and demand is forecast to fall below 40GW with wider restrictions coming into force in the UK.  

 Brent crude gained slightly on the International Commodities Exchange in London

In a quiet day’s trading on the oil markets, Brent crude gained slightly on the International Commodities Exchange in London while West Texas Intermediate also gained a little on the New York Mercantile Exchange. The U.S. benchmark gained on a bullish inventory report from the Energy Information Administration showing a 6 million barrel draw on crude stocks in the U.S. last week. A further weakening of the dollar against other major currencies also helped support crude oil, which is priced in dollars and becomes relatively cheaper for countries with strengthening currencies.      

Trading on the gas market has been a little more lively this morning

Demand on the UK gas system is slightly lower this morning as power demand has eased, lowering demand for gas-fired generation. Trading on the gas market has been a little more lively this morning with the new front month (February) contract gaining 0.68p but trade and movement beyond that has been unremarkable. Within day gas has traded up by 0.68p on yesterday’s closing level as the system is again forecast short today. The UK market closes at midday today and will reopen on Monday January 4. Crude oil prices are little changed overnight but carbon prices have recovered most of yesterday’s losses.