Brent crude down but carbon prices have set new highs

Prompt gas prices at the UK NBP fell by an average of 4.25p

The UK gas system was oversupplied throughout the trading day with increasing Norwegian deliveries and robust LNG send-out maintaining a surplus averaging 10MCM on Friday.  The supply outlook for the summer months was boosted across Western Europe by forecast increased LNG delivery which saw gas prices at trading hubs in the region tumble on the day.  Prompt gas prices at the UK NBP fell by an average of 4.25p while the May and June contracts were both down by 3.14p.  Contracts out to early 2022 were down by 2.50p while seasonal contracts for Summer 22 and beyond recorded more modest losses.  

 GB baseload power futures shed significant premium on Friday

GB baseload power futures shed significant premium on Friday with gas prices tumbling but near record high carbon prices provided some underlying support.  EU ETS unit prices eased slightly but remain at near record highs as the deadline for 2020 emissions compliance hits at the end of this week and many participants are still purchasing to comply. The day ahead baseload power contract gained £3.00/MWh as wind generation is forecast to remain subdued.  Weather forecasts for this week also suggest temperatures remaining below the seasonal norm.

 Brent crude down 66 cents week-on-week

Crude oil prices ended the week on the up, but Brent crude was still down 66 cents week-on-week.  The global benchmark gained 71 cents on the day to settle at $66.11 a barrel.  The U.S. benchmark, WTI, recorded a similar gain on the day to settle at $62.14.  Some easing of restrictions in Western Europe raised the possibility of an increase in demand in this part of the world but the deepening Covid crisis in India, the world’s third largest importer of oil, maintained a cap on market upside on Friday.  While recent market focus has been on demand, attention may shift to the supply side this week as analysts look to whether OPEC will increase production levels or whether the U.S. legal action against the cartel will stand up.    

Prompt gas prices have strengthened in early trading

The UK gas system is again over-supplied with forecast deliveries for today running 23MCM long.  With lower power demand and a slight pick-up in wind availability, gas-fired power generation demand has eased, and overall demand is matching the seasonal norm.  Prompt gas prices have strengthened in early trading as the market adjusts following Friday’s step lower.  Near futures contracts crated so far this morning have also recovered some of Friday’s losses with the front month up 1.28p to currently trade at 52.00p.  Oil prices are moving in the opposite direction with Brent crude down 88 cents to $65.23 a barrel but carbon prices have set new highs in early trading.