Weaker dollar and re-forecasts for 2021 demand from OPEC flipped the market

12 May 2021

 Rising carbon EUAs continued to buoy the energy markets

While the futures market may have opened with losses of around a penny on the near curve yesterday, the market firmed over the day as demand concerns picked up, while rising carbon EUAs continued to buoy the energy markets. Forecasts have turned cooler for the next week or so and GB gas demand is set to pick up as wind generation also decreases into the weekend. Storage gas reserves are also a concern with levels down below 10% of capacity with very little re-injection occurring during April and early May. This time last year stocks were close to 60% of capacity. Prompt prices rallied in the afternoon session with the spot and day ahead closing almost 3.00p higher, near futures settled an average of 1.30p up on Monday’s close    

 Strong gains for the second session in succession on Tuesday amid higher gas and carbon prices

strong gains for the second session in succession on Tuesday amid higher gas and carbon prices. Near months on the curve settled an average of £1.40/MWh higher while longer curve contracts moved around £1.00/MWh up. Lower wind generation for the rest of the week provided support to the day ahead contract which closed £6.33/MWh higher. Carbon EUAs moved 1.6% higher yesterday with the 2021 contract closing at a new high of €53.04 per tonne. Free allowances for the UK-ETS are to be reduced by 30%, while the first auction, set for 19-May is likely to draw more attention over the week although prices are expected to be in line with the EU-ETS.  

Concerns following the cyber-attack on The Colonial Pipeline system faded

As concerns following the cyber-attack on The Colonial Pipeline system faded the crude oil markets opened lower in early trading on Tuesday but a weaker dollar and re-forecasts for 2021 demand from OPEC flipped the market. Brent settled 23 cents higher to close at $68.55 a barrel yesterday after OPEC raised its forecast for demand of its own crude oil by 200,000 barrels per day as it expects demand in the back half of 2021 to increase saying it expects rising demand in China and the U.S. to counter any reduction in demand from India as new cases of Covid-19 appear to have plateaued there. The U.S. benchmark, West Texas Intermediate added 36 cents yesterday to settle at $65.28 a barrel.  

Market expects a further drop in U.S. crude oil reserves to be confirmed later today

GB gas demand is forecast at 187MCM for today and supplies are long by 13MCM with Norwegian supplies up on yesterday’s levels despite on-going summer maintenance works. Prompt prices are unchanged so far but NBP futures have opened firmer with the front month, June, a penny higher at 66.65p. Activity has been concentrated on the front of the curve, but an earlier trade saw the front winter move 1.28p higher. In the crude oil markets Brent is exchanging 42 cents higher at $68.97 a barrel as the market expects a further drop in U.S. crude oil reserves to be confirmed later today by the Energy Information Administration.