Power futures reach historic highs yesterday

Demand on the UK gas system stepped up again

Demand on the UK gas system stepped up again on Wednesday as storage injection rates of almost 30MCM were maintained throughout the trading day.  A reasonably strong renewable power contribution helped ease gas-fired power demand however and the system ran in surplus throughout.  Prompt prices still gained with spot and day ahead contracts gaining 2.00p and 1.50p respectively.  Supply issues were again the main market driver on Wednesday as restricted Norwegian and Russian deliveries pushed Western European gas prices even higher.  Near futures contracts at the UK NBP were up by over 3.00p to close to 120.00p for mid-winter months.

The day ahead baseload price eased again

Further restriction of Russian gas supply to Western Europe saw power futures reach historic highs yesterday.  The front month September contract settled at £110.00/MWh while all front winter months settled above that level also.  The restriction of Russian supply is set to last for the remainder of the month. The day ahead baseload price eased again on Wednesday as wind and solar generation are forecast higher today.  Higher wind availability reduces gas-fired generation requirements and should take some pressure off the front month contract.

Crude oil prices recorded minor gains on Wednesday

Crude oil prices recorded minor gains on Wednesday as the market was boosted by indications of increasing demand in the U.S.  The U.S. Energy Information Administration expect U.S. gasoline consumption to be 10% higher in 2021 over 2020 as job growth and increasing mobility is expected to outweigh any decline due to the spread of the Delta variant.  Gasoline stocks in the U.S. showed a further decline when the EIA weekly inventory data was released yesterday.  Crude oil stocks were also down week-on-week, suggesting some sustained increase in demand.  Brent crude gained 81 cents to settle at $71.44 a barrel.  EU ETS unit prices gained €1.00 per tonne.

Demand on the UK gas system has increased overnight

Demand on the UK gas system has increased overnight as the fore-cast increase in renewable generation has yet to materialise.  Wind generation is picking up however, having halved overnight and the UK gas system is well- supplied and is forecast 15MCM long with Norwegian deliveries increasing significantly as the problems with compression at the Troll field have been resolved.  Prompt gas contracts have yet to trade but bid-offer spreads suggest some easing of prices this morning and the front month is down by over a penny.  Crude oil is little changed overnight with Brent currently marked up at $71.38 a barrel.