The latest stimulus package for the U.S. economy has yet to produce any significant increase in oil demand

02 February 2021

UK gas market experienced a sharp downward correction on the first trading day of the new month

Despite above normal demand yesterday, the UK gas market experienced a sharp downward correction on the first trading day of the new month. Despite high demand levels and forecasts for further cold weather, a greater level of confidence regarding supply for the remaining winter period emerged. With demand rising to over 360MCM on the day, deliveries more than matched and the system finished in surplus. Prompt gas prices fell by 5.80p and the March contract was down by 4.91p. Losses stretched right along the curve with over a penny coming off all contracts for the coming 12 months.  

Gas-fired generation was called on to meet over 50% of demand yesterday

The sharp downward correction on the UK gas market saw GB power prices move lower on Monday with the new front month contract for March shedding £4.35/MWh. Losses on futures contracts for Summer 21 and beyond saw prices back to levels prevailing at the turn of the year. Carbon prices were little changed day-on-day. Day ahead baseload power reversed Friday’s step higher despite low wind availability and increased demand. Gas-fired generation was called on to meet over 50% of demand yesterday as wind generation dropped to below 4GW.  

The U.S. benchmark WTI gained 54 cents to settle at $54.74 a barrel

Crude oil prices gained on Monday with Brent crude up 47 cents to settle above $56.00 for the first time in 2 weeks. The U.S. benchmark WTI gained 54 cents to settle at $54.74 a barrel. A fresh commitment by Saudi Arabia to maintain production cuts helped boost the market on the day. While there is plenty of bullish appetite on the markets, the upside for oil has been limited by the ongoing economic stasis due to coronavirus lockdowns and particularly the depression in aviation demand. The latest stimulus package for the U.S. economy has yet to produce any significant increase in demand in the biggest oil consuming economy.  

 

The UK market has steadied following yesterday’s steep decline in prompt and near futures gas prices.

Following yesterday’s steep decline in prompt and near futures gas prices, the UK market has steadied. The front month is up by 0.26p in early trading with no trades yet registered beyond March. Within day gas has gained 1.15p in early trading despite a steep decline in demand overnight. Demand for today is forecast at 294MCM, a 70MCM decline from yesterday and line-pack is currently forecast 18MCM long. The main difference in the demand profile day-on-day is an increase in wind generation which has risen from 4GW yesterday to 12GW this morning while overall power demand is down with milder weather prevailing today.