Carbon prices rose by £2.50 to settle above £50.00 per tonne

24 May 2021

 The market response saw prompt prices recording substantial gains on Friday

An unplanned outage on the Norwegian system saw deliveries via the Langeled line fall off on Friday morning.  The UK gas system was forecast 30MCM short in the morning, but the outage proved temporary deliveries recovered later in the day and the system finished in surplus.  The market response saw prompt prices recording substantial gains on Friday, the spot price gaining 3.35p while day ahead gas for today was up by 3.10p.  The week ahead price for this week settled 2.30p higher but the front month gained only marginally while futures contracts beyond June all moved lower on the day, finishing significantly lower week-on-week.  

Wind generation hit new record highs of over 14GW on Friday

GB power futures recorded further gains on Friday as UK carbon prices rose by £2.50 to settle above £50.00 per tonne.  UK allowances are now trading at a premium of over 10% to EU allowances.  Baseload futures for the coming 12 months gained an average £1.25/MWh on the day but finished £3.60/MWh lower on average week-on-week. Day ahead baseload power moved sharply higher as prompt gas prices rose and wind generation was forecast lower for today.  Wind generation hit new record highs of over 14GW on Friday but is forecast to average just 5GW today.  

 The bearish mood which prevailed for most of the week lifted on Friday

The bearish mood which prevailed for most of the week lifted on Friday and Brent crude gained $1.33 on the day but still finished $2.27 a barrel lower week-on-week.  Accelerating reopening of business and general economic activity in Europe and the U.S. provided the basis for the upturn on the oil market on Friday.  Further optimism surrounding travel industry recovery is coming from the ramping up of vaccination in the EU although the slow pace of vaccination in Japan and the dire situation in India remain of concern.  Slow progress in talks between Iran and the U.S. continues to raise the prospect of the lifting of sanctions on Iranian oil exports and the potential for this to lead to over-supply is providing a counterbalance to the positive demand factors cited above.

 Crude oil has continued Friday’s rise

The UK gas system is finely balanced this morning with forecast supply and demand matching at 195MCM.  Wind generation has fallen from Friday’s record highs of over 14GW to 5GW and temperatures remain below normal for this time of year, resulting in demand running 10MCM above the seasonal norm.  Norwegian deliveries are back to normal following Friday’s disruption due to an unplanned outage and LNG send-out is just under 50MCM.  The spot price is up by 0.55p but day ahead and month ahead are both down by 0.90p.  Crude oil has continued Friday’s rise with Brent crude up by a further 92 cents to currently trade at $67.36 a barrel.