Brent settles above $70.00 a barrel for the first time in 2 years

 Gas demand fell 30MCM below the seasonal norm

With summer temperatures arriving over the weekend, gas demand fell 30MCM below the seasonal norm on Tuesday and the UK gas system ran supply surplus throughout the trading day.  LNG send-out remained strong, averaging 50MCM, or one third of total demand on the day.  Gas prices recovered most of the losses seen at the tail end of last week with prompt gas prices gaining an average of a penny, despite the comfortable supply-demand situation.  Prices for the coming 12 months were up by an average of almost 3.00p but seasonal contracts beyond the front winter recorded gains of less than a penny on the day.

 Baseload power prices resumed the recent rally

Baseload power prices resumed the recent rally after the long weekend in the UK as gas and carbon prices turned higher again.  The new front month contract for July gained £1.35 to top £75.00/MWh.  The front winter contract gained £1.90 to settle at £82.50/MWh.  Carbon prices recovered Friday’s slippage to finish in a range between €51.76 and €53.26 per tonne. The day ahead baseload contract fell by £2.00/MWh with low demand and higher wind generation forecast for today.  The week ahead contract finished up by £1.50/MWh however as wind forecasts for later this week and next were revise downwards.

Crude oil prices strengthened on Tuesday

Crude oil prices strengthened on Tuesday with Brent settling above $70.00 a barrel for the first time in 2 years.  The renewed strength in the oil market is mainly down to rebounding economic activity due to vaccine rollout in Europe and the U.S.  The U.S. recorded its lowest unemployment figures since before the pandemic last week and confidence is returning to all major economies except India.  The prospect of the lifting of sanctions on Iran still hangs over the market and could knock prices back below $70.00 if significant amounts of Iranian crude come back onto the market.

 Oil market rally has continued overnight

Demand on the UK gas system has fallen further today as temperatures remain above the seasonal norm and storage injection rates are lower than yesterday.  Wind generation has also picked up slightly, further reducing gas-fired generation demand.  Prompt gas contracts have yet to trade but the front month is down 0.52p and Winter 21 has shed 0.90p as the market relinquishes some of yesterday’s strong gains.  The oil market rally has continued overnight with Brent adding a further 60 cents to currently trade at $70.85 a barrel.  EU emissions allowances are also continuing to strengthen, gaining 50 cent overnight.