The see saw nature of global crude oil markets evident again

26 March 2021

 Suez Canal blockage remains, causing markets to struggle with the implication

  The volatile nature of crude oil markets continued yesterday with oil contracts coming under pressure from the outset.  In the last three session oil prices have been down, up, and down by more 5% on each occasion.  Despite previous reports that progress had been made, the blockage in the Suez Canal remains and markets seem to be struggling with the implication for energy prices.  The gas market was in benign mood yesterday with Summer 2021 down by 0.51p while Winter 2021 settled at 53.95p, down by 1.06p.  EUA carbon contracts also eased by €1.23 per tonne.

UK gas system operated with a strong surplus as demand dropped

The UK gas system operated with a strong surplus on Thursday as demand in the distribution and gas fired generation dropped.  With wind generation forecast at 12GW there was little requirement for conventional gas generation.  With a surplus of 34MCM present on the system, prompt gas prices came under pressure from the outset.  Both the spot and day ahead contract gave up XX and aa prospectively. The blockage in the Suez Canal was expected to drive some premium into the curve but the reverse was the case as news emerged that the impact on LNG tanker traffic had been minimal.   At market settlement the NBP was trading lower overall with average losses at 0.70p per therm.

Build up of LNG and oil cargo vessels remain

  The see saw nature of global crude oil markets was evident again on Thursday as prices turned lower once again in another volatile trading session.  The worries about a supply squeeze as a large container ship continues to block the Suez Canal seem to have dissipated.  While salvage efforts are still ongoing and the build up of LNG, Oil and other cargo vessels remain.  The market seems to believe that this issue will be resolved in short order despite little firm news to suggest this.  In any event the crude oil market gave up a considerable amount of premium that was added in the previous session with Brent declined by $2.46 to close at $61.95 a barrel.  

 Gas market opens firmer with contracts up by just over a penny

  Despite previous erroneous reports that a narrow channel had be cleared, the large container vessel remains firmly stuck in the Suez Canal.  Lloyds of London are reporting this morning that nearly $9.6 billion of goods is being held up each day.  Progress has been slow in releasing the vessel and it is apparent that energy markets are now becoming concerned about the impact of this disruption.  The gas market has opened much firmer this morning with contracts across the curve up by just over a penny. The front month April contract is trading at 48.54p, up by 1.29p.   Crude oil markets are also on an upward trajectory with Brent priced at  $63.22, up by $1.27 from last night’s close.