Carbon prices hitting new record high, EU ETS unit prices above €50.00 per tonne on Friday

10 May 2021

 Near futures gas prices relinquished some of the premium built up recently

The below average temperatures which prevailed throughout most of April and early May finally climbed to more normal levels for the time of year and demand on the UK gas system eased on Friday as a result.  Even as wind generation fell to below 2GW, gas demand remained subdued, and the system ran in surplus of around 5MCM throughout the trading day.  Prompt gas prices fell sharply, the spot price shedding 7.00p and day ahead for today falling by 6.85p.  Near futures gas prices relinquished some of the premium built up recently but the June contract remained at over 60.00p.  

 Near futures power contracts eased a little on Friday

Near futures power contracts eased a little on Friday but the downside was limited by carbon prices hitting new record highs.  The Quarter 3 contract eased by £0.45 and the Winter 21 contract was virtually unchanged while contracts further out gained up to £0.95/MWh with support from EU ETS unit prices all settling above €50.00 per tonne on Friday. The day ahead baseload contract fell £8.00/MWh as wind generation is forecast to pick up considerably today.  Wind generation languished below 2GW on Friday but is forecast to increase to around 8GW today.    

 Crude oil prices were little changed on Friday

Crude oil prices were little changed on Friday, or indeed week-on-week, with Brent remaining just above $68.00 a barrel where it has become rangebound of late.  U.S. crude made slightly stronger headway, settling at $64.90, a 2% gain week-on-week.  Optimism was fueled by news of increased air travel in the States and expectations of a pick up in Europe when the EU issues a “green list” of safe destinations next month.  Carbon pushed higher again with the spot price trading above €50.00 for the first time and the 2023 contract pushing towards €53.00 per tonne.

  Carbon market is the dominant force to the wider energy markets

The carbon market is the dominant force in providing direction to the wider energy markets this morning.  As EU ETS unit prices surge higher again in early trading today, gas prices are moving higher also with the front month up by 2.64p and the front winter up by just over a penny.  With increased wind generation and near normal temperatures, demand on the UK gas system was fallen to some 30MCM below the seasonal norm and the system is forecast 8MCM long today.  Crude oil is up marginally with Brent currently marked up at $68.68 a barrel while EU EUA’s are up by around €1.30 per tonne on Friday’s closing levels.