Spot and near futures gas prices gained over 2.00p and seasonal contracts along the curve also rose strongly

23 March 2021

An early supply surplus was eroded as the system was left marginally short at close of business

As wind generation failed to pick-up as forecast, more gas-fired plant was called on yesterday and overall gas demand increased by 10MCM over the course of the day. An early supply surplus was eroded, and the system was left marginally short at close of business. Spot and near futures gas prices gained over 2.00p and seasonal contracts right along the curve also gained strongly as carbon prices rebounded, cancelling out the losses of late last week. Crude oil prices traded in a range of $2.00 yesterday before settling at $64.62, just 9 cents up on Friday’s close but well down on levels seen in the first half of the month.

 Seasonal contracts gained strongly as carbon prices rebounded

The expected pick-up in wind generation failed to materialise yesterday and the consequent increase in gas-fired power demand led to tightness on the UK gas system. Ongoing maintenance on the Norwegian system left Langeled deliveries at just 45MCM and it was again down to LNG send-out to make up the shortfall. Spot and near futures gas prices gained over 2.00p and the front month gained 2.63p. Seasonal contracts right along the curve also gained strongly as carbon prices rebounded, cancelling out the losses of late last week.

 The new surge in Covid-19 has pulled crude oil prices back below $65.00

Crude oil prices traded in a range of $2.00 yesterday before settling at $64.62, just 9 cents up on Friday’s close. The consolidation in price appears to represent a compromise between lowered expectations of demand recovery due to new Covid restrictions in Europe and lifting of restrictions in the U.S. The market seemed settled in a range between $60.00 and $65.00 a barrel throughout February before moving closer to $70.00 in early March. The new surge in Covid-19 has pulled prices back below $65.00 and the partial reversal of the recent rally was also a response to last week’s IEA report which forecast lower demand growth this year.

  Norwegian supply system problems resolved

  With problems on the Norwegian supply system being resolved, Langeled flows to the UK are running at 65MCM and LNG send-out remains robust at 95MCM. As wind generation has doubled overnight, gas-fired power demand has reduced, leaving the UK gas system currently forecast 20MCM long. The comfortable supply situation has not yet been reflected in prompt gas prices as there are no trades recorded yet but near futures contracts are trading marginally down on last night’s close. The oil market is also in reverse with Brent crude down $1.13 to currently trade at $63.50 a barrel.