Prospect of the lifting of sanctions on Iran still hangs over the oil market

UK storage injection stepped up significantly on Wednesday

UK storage injection stepped up significantly on Wednesday, with demand otherwise weakening.  Overall demand remained well below the seasonal norm yesterday despite the increase in storage injection rates during the day.  Warm weather and moderately strong wind generation kept overalll demand below 150MCM for most of the day and the system remained in surplus throughout.  The spot gas price eased slightly but remaining prompt contracts gained by up to a penny.  Near futures prices fell by over a penny, maintaining a negative price differential over the past 5 days.  

 Carbon prices relinquished half of Tuesday’s gains

Baseload power futures largely reversed gains recorded on Tuesday as gas and carbon prices eased on Wednesday.  Prices for Q3 were down by £1.20 while the front winter shed £1.50/MWh on the day.  Carbon prices relinquished half of Tuesday’s gains to settle in a range between €51.36 and €52.83 per tonne. The day ahead contract gained £4.00/MWh as wind generation levels are forecast to fall lower today.  Wind exceeded expectations on Wednesday, delivering up to 7GW during the trading day but is forecast to deliver only half that amount today.

  Brent crude pulled away from the $70.00 mark

Crude oil prices strengthened further on Wednesday as OPEC announced there would be no change in production quotas this month and the Iran – U.S. talks stalled.  Brent crude pulled away from the $70.00 mark, gaining $1.10 to settle at $71.35 a barrel.  West Texas Intermediate recorded a similar gain to settle at $68.83 in the absence of any major news on U.S. supply and demand as the weekly inventory data was delayed due to Monday’s holiday.  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.

The UK gas system remains comfortably supplied

Storage injection rates are ramping up again this morning and demand has increased by 8MCM over the past 2 hours.  The UK gas system remains comfortably supplied.  LNG send-out and Norwegian deliveries are both running at 60MCM, and combined, are supplying over 80% of today’s demand.  Prompt contracts have yet to trade but near futures contracts traded so far have reversed yesterday’s losses.  The gas market is again moving in concert with carbon and oil this morning as Brent continues to strengthen and EUA prices are up by almost €1.00 per tonne overnight.