Gas demand has fallen below the seasonal norm as wind generation outstrips gas-fired generation
11 March 2021
A comfortable supply margin early in the day was reversedThe UK gas market recorded strong gains for a fourth session in the last five, leaving near futures contracts up by over 10% over the 5-day period. A comfortable supply margin early in the day was reversed as demand on the UK gas system increased with falling temperatures and a high wind-chill factor emerging. The high wind levels saw wind generation rise to 13GW, or 33% of GB power demand on the day. Early losses on the prompt were reversed and prices rose by an average of almost 2.00p. The front month and Q2 contracts gained the same amount while the full Summer 21 contract was up by 1.80p.
Further strong gains in gas and carbon prices saw near futures record significant gains on Wednesday bringing 5-day gains to almost 10%. An increase in near futures gas prices of over 10% over the past 5 days, coupled with new record high carbon prices drove power prices sharply higher. EU ETS unit prices finished in a range between €41.47 and €42.34 per tonne. Wind generation soared to a high of over 13GW yesterday, providing 33% of GB power demand. With wind availability forecast to remain high today, the day ahead power price fell by £6.25 to a 2-week low of £45.79/MWh.
Wind availability forecast to remain high today
Having spent most of the day in negative territory, crude oil prices rallied somewhat towards the close with Brent crude gaining 38 cents to settle at $67.90 a barrel. The U.S. benchmark, West Texas Intermediate, gained 43 cents to $64.44 a barrel despite a big increase in crude stocks in the States last week. The market was more focussed on a decline in gasoline and distillate stocks which suggest increasing consumption with the relaxation of coronavirus restrictions. Indeed, the big build in crude stocks is seen as a result of reduced refining activity which only reached 63% capacity last week in the aftermath of the severe weather in Texas and elsewhere, compared to 83% capacity prior to last month’s storm.
Crude oil prices rallied somewhat towards the close