Brent crude has biggest day-on-day decline in 15 months

Prompt prices recorded less strident gains

Tight supply fundamentals took the UK gas market higher again yesterday as only 2 LNG cargoes are due to berth at UK terminals for the remainder of this month and storage reserves remain seriously diminished.  The volatility which has become commonplace on the UK gas market of late was again in evidence on Monday morning as near futures gas prices opened 5% up on Friday’s closing levels with gains of over 4.00p.  There was some easing in later trading with gains averaging around 3.00p on settlement.  The system ran a supply surplus throughout the day despite low renewable power generation raising demand for gas-fired power.  Prompt prices recorded less strident gains with the spot up by 1.90p and day ahead by 2.75p.

 GB power market recorded gains

The GB power market recorded gains for a second consecutive day amid tight gas supply and a weak forecast for wind generation.  Ongoing maintenance on the Nord Stream 1 pipeline is limiting Russian gas supply to Western Europe while storage levels are only half what they were at the same time last year.  The day ahead contract gained £2.50/MWh as wind generation was forecast to remain weak and prompt gas prices recorded further gains.  Wind averaged just 1.5GW yesterday and is below 1GW this morning.  

Brent crude dipped below $70.00 a barrel for the first time in 8 weeks

The compromise between Saudi Arabia and the United Arab Emirates seems to have had little bearing on the original intention of the OPEC+ grouping, which was to begin increasing output from next month.  This intention was confirmed over the weekend with an announcement which saw a bearish response from traders on Monday morning.  Brent crude dipped below $70.00 a barrel for the first time in 8 weeks and fell as low as $67.75 at one point before settling at $68.62.  This was $4.97 a barrel down on Friday’s settlement level and marked the biggest day-on-day decline in 15 months.  

Crude oil has opened slightly up

The UK gas system is forecast marginally short for today with demand at 139MCM.  While maintenance on the Nord Stream 1 pipeline is limiting Russian supply to Western Europe, supply remains tight generally.  European storage levels are just half of what they were this time last year, the UK situation is worse, with only one third the volume of gas in storage compared with the same time in 2020.  Despite the tight supply outlook, near futures contracts have retraced some of yesterday’s gains and the front month is down by a penny in early trading.  Crude oil has opened slightly up on last night’s closing level with Brent currently trading at just over $69.00 a barrel.