Prompt gas prices fell significantly on Friday

The UK gas system was comfortably supplied and enjoyed a surplus of over 10MCM on average over the trading day on Friday. As temperatures rose closer to normal levels for this time of year, lower heating demand compensated for lower wind generation on the day. Storage withdrawals continued to provide swing supply, but this is expected to slow as prices fall back. LNG send‐out is likely to replace storage withdrawals as the main swing source, despite low LNG storage volumes, as increased LNG deliveries to the UK are expected for the remainder of April. Prompt gas prices fell significantly on Friday, with losses averaging 1.90p. Gas futures at the NBP fell for a third straight session but losses were marginal on the day and prices remained fractionally higher week‐on‐week.  

GB baseload power futures saw mixed movement

GB baseload power futures saw mixed movement on Friday as conflicting signals came from gas and carbon markets on the day. With the NBP gas and EUA carbon market moving in opposite directions, there was no clear price driver. The front month baseload contract fell by £0.30 but futures contracts generally gained marginally day‐on‐day and remained higher by an average of £0.84/MWh week‐on‐week. The day ahead baseload contract firmed by £2.00 as wind is forecast to fall below 5GW today but pick‐up as the week progresses, leaving the week ahead price for this week £0.25/MWh lower.    

Carbon prices gained slightly on the day but remained below recent record highs

Crude oil prices eased a little following a 3‐day run of gains and remained almost $2.00 lower week‐on‐week while carbon prices gained slightly on the day but remained below recent record highs. Brent crude shed 25 cents to settle at $62.95 as currency exchange rates remained stable and no other immediate driving forces emerged. West Texas Intermediate also shed $2.00 week‐on‐week to finish at $59.32 a barrel on Friday. There was little speculative buying last week as the market seems paralysed by the conundrum of whether vaccination programmes will allow more rapid lifting of restrictions on economic activity or whether the increase in Covid case numbers in some major economies will extend demand suppression for a longer period.  

Demand on the UK gas system has risen sharply this morning

Demand on the UK gas system has risen sharply this morning as wind generation is running below 2GW. The consequent increase in gas‐fired power generation has driven overall demand to 290MCM and the system is currently forecast 30MCM short. The significant supply deficit is driving prompt gas prices strongly in early trading and the spot price is up 7.15p on Friday’s closing level. Day ahead gas is up 4.05p although there is no indication as of now that there is any major supply issue. LNG send out and storage withdrawals continue apace while Norwegian deliveries remain robust. On the futures market, the front month has gained just over a penny while crude oil remains rangebound at $63.16 a barrel.