Pressure on the power futures market is set to continue

UK NBP gas market opened higher on Tuesday

The UK NBP gas market opened higher on Tuesday and gains were extended throughout the session as contracts across the curve added significant premium.  There was little change in the overall gas supply/demand status to merit this market movement, but prices firmed, nonetheless.  In fact, gas demand fell to 145MCM and the system ran with a surplus of 12MCM.  It would appear that the market is more concerned with the prospect of higher temperatures in coming days and the impact that this might has on power demand for cooling.  The markets seem to be pricing in the risk of above average temperatures for the coming days and it remains to be seen if this scenario comes to pass.

  GB baseload power futures moved higher

GB baseload power futures moved higher in line with gas and carbon prices with September 2021 up by £3.90/MWh and Winter 2021 by £2.25/MWh.  EU ETS unit prices gained €0.65 per tonne on Tuesday on average.  Pressure on the power futures market is set to continue as gas injection rates ramp up and Norwegian gas deliveries are restricted by maintenance.  The day ahead price also firmed by £1.00/MWh with support coming from firmer.  The gain in the prompt market was somewhat surprising given that wind generation levels were expected to increase to 6GW for today.

 Crude oil traded both ways during Tuesday’s session

Crude oil traded both ways during Tuesday’s session with the spread between the high and low points staying at just over a dollar.  The Brent crude contract for August delivery initially opened lower but in truth the trading on the market was especially languid.  Crude reached a high point of $72.30 at one stage and fell back to a low of $71.28 in the mid-point of the session.  There is no doubt that there is continuing optimism that the apparent success of the vaccine roll out will lead to a recovery in Global economies and more demand for crude and crude oil products. On the downside some new variants are a cause for concern.  At market close crude finished 81 cents off its previous settlement at $72.22 a barrel.

UK gas market has opened firmer once again this morning

The UK gas market has opened firmer once again this morning and contracts are extending gains from the previous session.  The front month has traded to high of 69.22p per therm but has eased back from that and is currently priced at 69.19p per therm, up by 1.45p from last nights close.  There is also significant pressure on the Winter 2021 contract which has added just over a penny in early trading.  The market is clearly concerned about the scheduled maintenance in some Norwegian fields and the potential impact on the supply/demand balance.  That said forecast demand is at 127MCM and the system is running with a surplus of 5MCM.