UK gas system began the week in deficit
The UK gas system began the week in deficit as renewable power generation fell off and gas-fired power generation was called on. The early supply deficit on the system was reversed and supply outstripped demand slightly for most of the day yesterday. Norwegian deliveries increased despite the Troll field remaining off-line. Gas-fired generation supplied 55% of GB power demand as total renewable generation was less than 1GW on Monday. Spot and day ahead gas prices gained over 2.50p while the week-ahead and balance-of-month were up by over 4.50p. Contracts for the remainder of this year were up by an average of 3.75p.
GB baseload power futures moved higher again on Monday
GB baseload power futures moved higher again on Monday as gas and carbon prices gained strongly on the day. Yesterday’s surge in near futures gas prices was compounded by gains of €1.00 per tonne in EUA’s to push power futures higher across the curve. The front winter contract settled at a new high of £105.50/MWh. The day ahead price shed £9.80/MWh as demand is forecast lower and a modest increase in renewable generation is expected today. That increase has yet to materialise as total renewable generation is supplying just over 10% of GB demand this morning.
Crude oil prices fell for the first time in 2 weeks
Crude oil prices fell for the first time in 2 weeks with the new front month Brent contract for October shedding $2.25 a barrel. The move lower came as industrial activity in China and the U.S. slowed in July. Concerns also remain about the spreading coronavirus cases in India and Indonesia, two significant oil consuming countries. If growth in demand does not match projections, increasing OPEC production may lead to a global over-supply and cause prices to weaken. Yesterday’s reversal came despite a weaker dollar, which would normally push oil prices higher, and also ignored a general rally on stock markets.
Gas demand has eased overnight
Gas demand has eased overnight as cooler weather reduces air-conditioning demand. Deliveries are currently 15MCM ahead of demand with Norwegian supply increasing, despite the fact that the Troll field is not now due back on-line until Friday. LNG send-out remains at less than 10MCM with only one new cargo due in the next 2 weeks. The prompt market has yet to trade but prices will likely come under downward pressure if the system remains in surplus. Near futures prices have opened lower with the front month down by 1.36p. The new front month Brent contract for October is up 30 cents on yesterday’s close at $73.19 a barrel.