EUA prices relinquished all of Friday’s gains

 The slump in UK gas prices midweek was almost completely reversed on Friday

The slump in UK gas prices midweek was almost completely reversed on Friday to leave contracts 1.00p to 2.50p higher week-on-week.  The fundamentals of tight supply and low storage reserves across Western Europe became the main market drivers again.  Strong demand and a price premium in Eastern markets such as China, Japan and Korea have seen up to 80% of LNG shipments heading east.  In what was an extremely volatile week’s trading, price swings of over 10.00p per therm were recorded.  Day ahead gas for today gained 10.35p while the week ahead contract for this week was up by 12.25p on Friday.  

 GB power futures moved higher again on Friday

GB power futures moved higher again on Friday, but gains were not as steep as gas futures as power supply margins are not seen to be as tight as gas system margins for the coming months.  While the rebound in gas prices was certainly cogent, carbon price recovery was slower, and this helped cap the increases on the power market. The day ahead gained £5.00/MWh on higher gas prices and low wind forecast for today.  Wind generation was running at just 1GW over the weekend and is below 0.5GW this morning.  Solar power has also fallen off to just 1GW this morning.

 The oil market saw buyers dominate again on Friday

The oil market saw buyers dominate again on Friday as confidence in demand recovery increased.  The inaction of the OPEC+ group of producers, while likely to be temporary, is viewed as a positive for now as strong demand growth is signaled from the U.S. in particular.  As the impasse between Saudi Arabia and the UAE continues, other OPEC members and Russia are likely to lose patience and increase their own output without group agreement.  The signs of increasing demand are now real, with U.S. gasoline demand back to pre-pandemic levels while Chinese and European demand are gradually increasing as well.  Brent gained $1.43 on Friday to settle at $75.55 but remained 62 cents lower week-on-week.  

The volatility on European gas markets has continued this morning

The volatility on European gas markets which was so much in evidence last week, looks like continuing as prompt and near futures gas prices at the NBP have opened significantly lower this morning.  One of the principal supports for European gas prices of late, carbon emissions, have lost ground in early trading this morning with EUA prices relinquishing all of Friday’s gains.  The UK gas system is comfortably supplied despite increased gas-fired power generation, compensating for very low renewable generation today.  Near futures gas prices are down by over 3.00p while Brent crude is down by 70 cents to trade below $75.00 a barrel again.