UK gas system was finely balanced yesterday
The UK gas system was finely balanced yesterday morning but demand increased slightly through the morning and with deliveries unchanged, the system fell into deficit. The supply shortfall was minimal however and prompt gas prices gained only marginally as a result. Overall demand was lower day-on-day as renewable generation displaced a significant tranche of gas-fired generation with solar generation peaking at over 5GW on the day. The medium-term supply outlook remained poor and near futures contracts gained over 2.00p as a result.
GB baseload power futures recovered losses
GB baseload power futures recovered losses of the previous session as gas and carbon prices moved higher on Wednesday. The front month gained £1.95/MWh while Q4 was up by £2.40/MWh. Carbon emissions prices gained with EUA’s up by €1.00/tonne to trade in a range between €55.34 and €56.33 per tonne. The day ahead price was little changed as renewable generation picked up and is forecast higher again today. Solar generation peaked at over 5GW yesterday but is forecast to fall off today while wind generation is forecast to pick up to maintain a strong renewable contribution today.
The oil market remained bearish
Crude oil prices fell for a third consecutive day on Wednesday with Brent crude shedding $2.03 to settle at $70.38 a barrel. The U.S. benchmark fell by slightly more to settle at $68.15, falling below $70.00 a barrel for the first time in over 2 weeks. U.S. inventory data showed a bigger-than-expected rise in crude stocks last week. Together with a less-than-expected draw on gasoline stocks, the market remained bearish. The mood was not helped by the latest data on the pandemic which showed U.S. infection rates rising to almost 100,000 per day. Covid infection rates are also on the rise in China, the second largest oil consuming country.
Demand on the UK gas system remains below the seasonal norm
Demand on the UK gas system remains well below the seasonal norm, thanks mainly to low injection demand. A further pick up in renewable power generation this morning leaves the system with a supply surplus of 20MCM as Norwegian supply has increased overnight. The increase in Norwegian deliveries is leading to optimism that the supply will improve with the full return of the Troll field tomorrow. The front month was shed 3.24p in early trading this morning while Winter 2021 is down by 2.05p. Crude oil continues to slide with Brent dipping below $70.00 a barrel in the most recent transactions.