Baseload power futures firmed as gas, carbon and crude oil prices climbed higher

05 March 2021

 Prices edged higher from opening as demand climbed slightly higher

The UK gas market was less inclined to ignore the relatively high demand for the second day in a row and prices edged higher from opening as demand climbed slightly higher on colder weather and a dearth of wind generation.  Demand on the conventional gas generation sector remained high as wind levels proved disappointing at 2GW.  The gas spot and day ahead markets added 1.65p and 1.35p respectively as a system deficit persisted throughout the day.  Crude oil provided a leg of support for the gas curve which gained by a penny on average.  The supply outlook remains positive however with LNG tankers due to arrive from Qatar and the USA in coming days.  

Carbon prices continued to see saw

Baseload power futures firmed on Thursday as gas, carbon and crude oil prices climbed higher.   The front month April contracted increased by £0.75/MWh and the full summer contract added £0.78/MWh.  Carbon prices continued to see saw with EU ETS unit prices settling up by 69 cents in a range between €38.11 and €38.96 per tonne.  With wind generation coming in lower-than-expected system tightness was an issue on the day.  The day ahead settled at £78.66/MWh as volatility continued on the prompt market.  

 The rally in crude oil markets was extended for the second session

The rally in crude oil markets was extended for the second session in a row as the market was buoyed by more speculation that the OPEC plus Russia group would keep their production in place for the foreseeable future.  While at the time of writing the meeting was ongoing unofficial briefing were suggesting that there was to be a rollover of production quotas for all member with the exception of Russian and Kazakhstan.  Both of these producers were to be allowed boost their production by 130,000 and 20,000 barrels a day respectively.  At market settlement the Brent crude contract for May delivery closed at $66.74, up by $2.67.  

 Demand on the UK gas system remains well above the seasonal norm

Demand on the UK gas system remains well above the seasonal norm although current demand/supply forecasts suggest a surplus of 16MCM on the system.  Gas-fired power generation remains the biggest source of power with wind generation once again low.  The imminent arrival of a number of tankers into the UK has boosted LNG send out which is running at 78MCM this morning.  Following yesterday’s strong gains, crude oil markets are heading higher still as Brent trades at $68.27, $1.53 up from last night’s close.  EUA carbon markets have ticked up by 13 cents while gas contracts have opened firmer.  The front month is priced at 40.56p per therm, up by 0.73p.