Crude oil prices eased on Wednesday

4-day rally culminated in a day-on-day surge in the front month price of 16%

Following 4 days of strong gains, the UK gas market adjusted lower on Wednesday. The previous 4-day rally culminated in a day-on-day surge in the front month price of 16% and a week-on-week increase of 42% on Tuesday, the market was primed for adjustment. That adjustment was sharp as the front month contract more than reversed Tuesday’s surge, shedding 12.27p to settle at 65.16p, but was still up by 20% week-on-week. Movement beyond the current winter months was less dramatic with Summer and Winter 21 contracts up by less than 2.5p week-on-week.  

 Carbon prices fell back on the day

The February and March GB power contracts fell by £10.00/MWh in response to the reversal on the UK gas market on Wednesday. The system margin was also improved on the day, helping to ease the market. Carbon prices also fell back on the day, but front month baseload power remained elevated at £75.00/MWh. The day ahead baseload price fell back from Tuesday’s spike of £136/MWh but remained elevated at £112/MWh. The system margin is forecast slightly stronger for today and wind generation levels are forecast to pick up to around 8GW.  

The fall in WTI was the first in 7 days

Crude oil prices eased on Wednesday but retained most of the premium gained in the rally of the previous week. Brent crude shed 72 cents to settle at $56.06 a barrel while West Texas Intermediate was down 30 cents to $52.91. The fall in WTI was the first in 7 days and came on the back of bearish inventory report from the States yesterday which showed a large increase in gasoline and distillate stocks in the first week of the New Year. The data suggests demand in the U.S. remains heavily depressed and while OPEC may be committed to preventing any collapse in prices, near-term demand issues will continue to limit further upside in oil prices.  

Crude oil has slipped a little further overnight

  Demand on the UK gas system is forecast some 20MCM above the seasonal norm for today. Despite a pick up in wind generation, gas-fired generation is still providing 50% of GB power demand. The gas system is forecast 7MCM long however and the spot gas price at the NBP has opened 1.55p down on last night’s close. Day ahead gas is up by almost that amount however as wind availability is expected to fall again tomorrow. The front month contract has shed 1.16p to currently trade at 64.00p even and the Summer 21 contract is yet to trade. Crude oil has slipped a little further overnight and carbon prices are also easing again in early trading this morning.