Crude oil moved lower again, despite a further weakening of the dollar

21 May 2021

UK gas market turned higher on Thursday

The UK gas market turned higher on Thursday, reclaiming some of the premium shed over the previous 3 days.  Early trading on the UK gas market suggested that the rewinding of recent premium had ceased and that prices might stabilise somewhat but the upturn on the gas futures market gained momentum as the day progressed and near futures prices gained over 4.00p by close of business.  Futures prices remain around 8% lower week-on-week however but the correlation between gas and carbon prices remains strong as evidenced again yesterday.  Prompt gas prices recorded more modest gains as demand fell and the system maintained a supply surplus for most of the day.  

 GB power futures rebounded strongly on Thursday

GB power futures rebounded strongly on Thursday as carbon recovered some of the recent losses to trade above €50.00 per tonne again.  Carbon prices gained over 6% with EU and UK markets moving in tandem following Wednesday’s sell-off.  Baseload futures for the coming 12 months rose to average £75.00/MWh. Day ahead baseload power moved sharply lower as wind generation soared and is forecast to remain elevated today.  Wind is expected to contribute 12GW today and is forecast to displace gas as the largest source in the GB generation mix today.  

 Brent crude shed $1.55 to settle at $65.11

Crude oil moved lower again on Thursday despite a further weakening of the dollar.  Reports of progress in talks between Iran and the U.S. raised the prospect of increased Iranian oil coming to the market in the event of an easing of sanctions.  This, at a time when demand is only slowly recovering from the economic downturn caused by coronavirus, raises concerns of possible market over-supply.  Brent crude shed $1.55 to settle at $65.11 while West Texas was down $1.92 to $61.94 a barrel. The dollar has continued to weaken amid speculation around an increase in interest rates by the Federal Reserve.    

Brent crude has shed a further 50 cents overnight

The UK gas market continues to recover some of the premium shed earlier in the week as near futures contracts are up by 1.50p this morning.  The situation is not helped by a big fall-off in Norwegian deliveries, with flows on the Langeled line down to just 35MCM.  Demand remains some 15MCM above the seasonal norm, despite high wind availability and forecast deliveries are currently running 30MCM short.  The current system imbalance has caused prompt prices to open stronger and will likely lead to further gains through the day.  Brent crude has shed a further 50 cents overnight and the carbon market appears more stable in early trading this morning.