Significant factor in oil demand is the downturn in aviation
25 January 2021
Forecast lower temperatures and falling wind availability were realised on FridayForecast lower temperatures and falling wind availability were realised on Friday and demand on the UK gas system increased to 338MCM. The cold snap was expected to remain until Monday with temperatures set to rise for the remainder of the week. Never-the-less, the week ahead contract for this week gained 3.50p. The supply side was slow to respond and the system ran in deficit throughout the day, although approaching balance by close of business. Prompt and near futures gas contracts at the UK NBP recorded gains of almost 4.00p with the front month settling above 60.00p and the average price for 2021 settling just below 50.00p.
Baseload futures tracked gas prices higher with the front month settling at £69.80/MWhWind generation is forecast to fall from Friday’s levels of 5GW to less than 3.0GW on Monday, with temperatures forecast to drop further to put extra pressure on the power grid. An unplanned outage at the Heysham plant also added to the upside on the day and the day ahead baseload product soared to £113.09/MWh. Baseload futures tracked gas prices higher with the front month settling at £69.80/MWh but still down slightly week-on-week. On the carbon market, EU ETS unit prices retained the mid-week gains to settle in a range between €34.15 and €34.80 per tonne.
Crude oil prices slipped back on Friday but remained little changed week-on-week. Increases in the number of new Covid-19 cases along with reports of extended lockdowns in many countries continue to depress global demand and continues to be a concern for the market. One of the most significant factors in oil demand is the downturn in aviation and this seems likely to continue for many months until high levels of vaccination are achieved, and it is considered safe to travel again. Brent crude shed 69 cents to settle at $55.41 a barrel while West Texas Intermediate fell by 80 cents to settle at $52.38 a barrel.
Crude oil prices slipped back on Friday