Little change to carbon prices

Overall renewable generation doubled day-on-day

Overall renewable generation doubled day-on-day and The UK gas system maintained a supply surplus averaging 7.5MCM throughout the trading day on Friday.  The more comfortable supply situation was made possible by increased wind generation, reducing gas-fired power demand.  With no new price drivers in play, prompt and near futures gas contracts at the NBP eased on Friday.  Prompt prices fell by an average of 0.35p while near futures were down by an average of 1.25p on the day but remained between 3.00p and 4.00p higher week-on-week none-the-less.

GB baseload power futures tracked gas prices lower

Despite continuing oil and carbon price increases, GB baseload power futures tracked gas prices lower on Friday.  The front month was down by £1.05 and Q4 21 by £1.35/MWh week-on-week.  Increases in EU ETS unit prices were offset for UK generators by an almost equivalent decline in UKA’s on Friday. Day ahead baseload gained £4.00/MWh as wind availability is forecast to fall off again over the weekend and remain low today but pick up as the week goes on.  The week ahead for this week still gained £2.40/MWh on Friday.

 Brent crude settled 50 cents higher week-on-week

Monday’s dramatic drop of almost $5.00 in crude oil prices was gradually recovered over the course of the week and Brent crude settled 50 cents higher week-on-week at $74.10 a barrel.  The U.S. benchmark, West Texas Intermediate, recorded a similar recovery to settle at $72.07 on Friday.  The strong recovery results from optimism around increasing demand as vaccine roll-out progresses in Europe and the U.S.  The imminent increase in production by OPEC+ members is considered to be broadly in line with increasing demand in the Western World but clouds remain over the spread of the virus in other major oil consuming markets such as Australia, Indonesia, India and Japan.

 Crude oil has begun the week on a bearish note

Rising power demand due to high levels of air-conditioning has led to overall gas demand on the UK system outstripping supply this morning.  The situation is not helped by a fall-off in wind generation which is providing less than 0.5GW and the gas system is forecast 4MCM short today.  Once again, trading is thin at the NBP with no prompt gas contracts traded so far but near futures including the front winter are up by an average of 1.50p.  The premium available on Asian markets continues to draw LNG cargoes east.  Crude oil has begun the week on a bearish note with Brent down $1.25 a barrel from Friday’s close while carbon prices are little changed.