Crude oil prices slipped back from the 2-year highs

Demand on the UK gas system hit a new year-to-date low

The Norwegian system summer maintenance programme ramped up to cause maximum disruption to UK gas supply with deliveries via the Langeled line falling to 20MCM on Wednesday.  While demand on the UK gas system hit a new year-to-date low, and the system retained an average supply surplus of 8MCM through the day, spot and day ahead prices gained 1.30p and 1.15p respectively.  The market remains concerned that rising temperatures will lead to increased power demand for air-conditioning, adding to gas demand when storage injection should be the priority.  Near futures contracts gained over 1.50p as concerns remain over low storage levels and supply-demand balance over the summer months.

 Pressure on the power futures market is set to continue

GB baseload power futures moved higher in line with gas prices on Wednesday with near futures averaging gains of almost £1.00/MWh.   Pressure on the power futures market is set to continue as gas injection rates ramp up and Norwegian gas deliveries are restricted by summer maintenance programmes. The day ahead price gained marginally as renewable power was forecast to increase day-on-day.  Wind generation is expected to rise to 5GW today and solar generation is forecast to reach new record highs over the coming days.  

 Global benchmark appears to have established a new platform above $70.00

Crude oil prices slipped back from the 2-year highs seen on Tuesday as U.S. demand was lower than expected and talks between Iran and the U.S. stalled.  Weekly inventory data from the Energy Information Administration on Wednesday showed a fall-off in U.S. distillate demand last week when the “driving season” usually commences and demand surges.  The market is keenly focused on demand on countries where vaccine roll-out is facilitating the revival of economic activity leading to increased oil demand.  Brent crude shed 37 cents to settle at $71.85 a barrel, which is just 50 cents higher over the past 5 days but the global benchmark appears to have established a new platform above $70.00.

EU ETS unit prices appear to be moving sharply higher

The UK gas supply-demand balance was forecast to be tight today but a sharp fall-off in storage withdrawals has seen the system fall 17MCM short.  The prompt market has not recorded any firm trades as yet but offer prices suggest a sharp increase is likely.  The front month is up fractionally on last night’s closing level and Winter 21 is also up marginally.  Yesterday’s reversal of the recent upward trend in crude oil prices has been retraced with Brent up 33 cents overnight.  EU ETS unit prices appear to be moving sharply higher again in early trading today with the front month price up by €1.34 per tonne.