Carbon prices continued to edge higher with EUA’s gaining 35 to 40 cent

27 May 2021

Futures gas contracts at the NBP relinquished early gains

Futures gas contracts at the NBP relinquished early gains to finish only marginally higher day-on-day but prompt gas contracts settled 2.50p higher on average.  Earlier movement on the UK gas market suggested another day of strong gains but as an early supply deficit on the UK gas system was reversed, prices fell back again.  The reversal of the supply-demand balance was down to increased LNG send-out over the course of the day.  Storage withdrawals continued to bolster supply and also increased as the day progressed.  

GB power futures continued to track gas and carbon prices higher

GB power futures continued to track gas and carbon prices higher on Wednesday with gains of up to £0.95/MWh towards year end.  The front month gained just £0.30 while Q3 and Q4 gained £0.70 and £0.95 respectively but movement further out the curve was marginal.  Carbon prices continued to edge higher with EUA’s gaining 35 to 40 cent. The day ahead baseload price gained strongly as wind generation levels are forecast to fall further today.  Wind is providing just 2GW this morning while nuclear generation is also lower at 5GW, inviting more expensive gas-fired plant onto the grid.

Crude oil prices were virtually unchanged for a second consecutive day

Crude oil prices were virtually unchanged for a second consecutive day as different market drivers acted to counter each other and deny any clear market direction.  The global market was subjected to no particular pressure and early gains were reversed as the dollar strengthened during the day to leave Brent just 3 cents higher day-on-day at $68.68 a barrel.  U.S. inventory data showed both crude and distillate stocks declining but shale oil production is on the increase, raising new of possible over-supply.  West Texas, like Brent, surrendered early gains as the dollar strengthened and finished 2 cents lower at $60.99 a barrel.  Carbon prices continued to edge higher with EUA’s gaining 35 to 40 cent.

Demand on the UK gas system has fallen below the seasonal norm

As temperatures across the UK and Ireland rise, demand on the UK gas system has fallen below the seasonal norm today.  With Norwegian deliveries increasing to 80MCM and LNG send-out remaining robust at 60MCM, the system is forecast 9MCM long for today.  The prompt market has yet to trade but with demand falling, it is reasonable to expect some retracing of yesterday’s gains.  On the futures market, the front month has opened over 2.00p lower while the front winter is down by 0.50p.  Crude oil prices have eased slightly overnight while EU carbon prices have shed over a euro.