Carbon prices eased

UK gas prices eased on Friday

News of the return to service of the giant Norwegian Troll field from Tuesday helped bring some easing to UK gas prices on Friday for the first-time last week. Renewable power generation fell to half the previous day’s levels, adding significant extra demand to the UK gas system on the day. Supplies were more than adequate to meet the higher demand, but prompt gas prices still gained, within day rising by 0.70p and day ahead gaining 0.75p. While wind generation is forecast lower again today, the outlook for the rest of the week is more robust and the week ahead price shed 1.30p. The month ahead was down by 1.22p and Winter 21 by 0.75p.

 The day ahead price hit its highest level since January

GB power futures were only marginally changed on Friday but near futures prices were up by over 10% week-on-week. The only exception of the Q1 22 contract which shed £1.00/MWh on the day. Carbon prices eased with EU ETS unit prices shedding 70 cent to settle at €53.23 per tonne on Friday and having traded within a tight range all last week. The day ahead price hit its highest level since January, settling at £123.00/MWh amid forecast tight supply and dwindling wind availability. Wind fell to under 5GW on Friday and is forecast at just 1-2GW today with solar generation also set to come in at around that level.

 Gradual rise in price has continued for almost 2 weeks

Brent crude gained a further 28 cents to settle at $76.33 on Friday consolidating its position above $75.00 a barrel. The gradual rise in price has continued for almost 2 weeks following the $5.00 drop in price on July 19. The move higher derives from a number of sources including demand growth in Europe and the U.S. which appears to be in line with projections and matching increased production by OPEC+. Concerns remain about the spreading coronavirus cases in India and Indonesia, two significant oil consuming countries. Indian imports are falling as the country is said to be using strategic reserves at the moment.

 Gas demand is increasing this morning

Gas demand is increasing this morning as the UK does not have a holiday today. Deliveries are currently lagging demand by 3.6MCM as wind generation levels are running at less than 1GW and gas-fired generation is meeting 50% of GB power demand. LNG send-out remains at less than 10MCM with no new cargoes due in the coming days. The prompt market has yet to trade but prices will inevitably come under upward pressure if the system remains in deficit. Near futures prices have opened strongly higher with the front month up by 3.50p. The new front month Brent contract for October is down 80 cents on Friday’s close at $74.70 a barrel.