Markets are treading water in advance of the weekly U.S. inventory figures, due later today

27 January 2021

At the close the February contract was marked down bringing the two-day loss on this contract to 6.05p

The front month February contract opened weaker on Tuesday as the spill over from the previous session continued.  Losses were extended as further trades went through and it was apparent that a sell off at the front of the curve was in full swing.  At the close the February contract was marked down by 2.45p at 54.10p, bringing the two-day loss on this contract to 6.05p.  Pressure also came on the April contract which shed further premium of 1.85p.  It is clear that as the weather turns milder that expensive short positions are being given up and this has impacted contracts further out the curve.  Overall losses were in the order of 0.25p from Q2 forward.

 

Near curve baseload power contracts continued to come under pressure on Tuesday

Near curve baseload power contracts continued to come under pressure on Tuesday and more premium was driven out of the market.  Once again, the front month was the biggest loser as gas led losses saw this contract drop to £64.35/MWh, £2.28 lower than the previous settlement.  Both March and April shed £1.48 and £0.60 respectively as warmer weather and more supply weighed on the market.  Day ahead baseload for Tuesday delivery remained elevated and added further modest premium as wind generation dropped and the minimum supply margin tightened.  

Brent crude contract trading in a very narrow range of just over a dollar

The Crude oil market was rangebound on Tuesday with the Brent crude contract trading in a very narrow range of just over a dollar.  Brent struggled to reach a high point of $56.34 and low of $55.29 before eventually settling more or less flat at $55.91 a barrel.  The WTI contract on Nymex was in similar mood but did post a modest loss of just 27 cents at settlement.  The market has in recent times being tracking U.S. equities but the focus on this seems to have waned in recent sessions.  Markets are treading water in advance of the weekly U.S. inventory figures which are due later today.  

 Gas market weakness is once again apparent in early trading

Milder temperatures continue the morning and forecast gas demand for today is predicted slightly lower.  Despite this the system is predicted to be short by some 9MCM as LNG send out is down on yesterday’s levels.  Imports via the two gas interconnectors remain strong and this is helping to replace some of the LNG shortfall.  Gas market weakness is once again apparent in early trading and pressure on the front of the curve remains.  The front month February contract is moving lower for the third session in row and is priced at 52.46p, 1.64p lower than last nights close.  Crude oil markets have firmed slightly as we await the U.S. inventory report due later today.