Early gains on the UK gas futures market were reversed over the course of the trading day
As oil prices turned lower following a bullish start on Monday, early gains on the UK gas futures market were reversed over the course of the trading day. The front month shed 0.85p while the full Summer 21 contract was down by 0.79p. On the prompt market, spot and day ahead prices were little changed at close of business despite an early surge as the system ran a 20MCM deficit in the morning. Increased LNG send-out from the Isle of Grain, and Norwegian deliveries to St. Fergus, all but balanced the system by the close. The week ahead fell by 2.20p as wind generation is forecast higher, easing gas demand for power generation.
Stronger supply margins saw the day ahead price fall to a 10-day low on Monday
Baseload power futures turned lower on Monday as gas and oil prices eased, and carbon prices recorded only marginal gains on the day. The Q2 and full summer contracts shed £0.60/MWh to settle at £50.85/MWh and £50.80/MWh respectively. EU carbon allowances gained fractionally to finish in a range between €39.00 and €40.00 per tonne. A modest pick-up in wind generation and stronger supply margins saw the day ahead price fall to a 10-day low on Monday. Wind generation crept above 4GW on the day and are forecast to increase further today.
The market remains bullish with pandemic restrictions being eased
Following a 3-day run of gains which saw the global benchmark, Brent crude, threaten the $70.00 a barrel mark, the oil market ran out of steam on Monday. Brent fell by $1.12 a barrel while the U.S. benchmark, West Texas Intermediate, fell by just over a dollar to settle at $65.05 which is still a 20-month high. The partial reversal of the recent strong gains was mainly down to a further strengthening of the dollar in the wake of the approval of the U.S. $1.92 trillion stimulus package. There was also an element of profit taking on the day but overall, the market remains bullish with pandemic restrictions being eased and demand increasing in many parts of the world.
The bearish sentiment on the prompt market has not spilled over to the futures market
With demand on the UK gas system falling back to around the seasonal norm, the system is finely balanced this morning. Wind generation remains weak but lower power demand means that gas-fired power generation is lower day-on-day. Prompt gas prices have eased with the spot price down by 0.70p while the day ahead contract is down by 1.50p as wind availability is forecast to pick up tomorrow. The bearish sentiment on the prompt market has not spilled over to the futures market where the front month is up by 1.10p and the full summer contract by 0.74p. Yesterday’s reversal on the oil market has been partly recovered with Brent crude up 50 cents overnight to currently trade at $68.74.