Global benchmark has gained over $7.00 over 3 days

26 August 2021

The UK gas market opened strongly on Wednesday

The UK gas market opened strongly on Wednesday morning with gains of over 3.50p on the front month.  Prices eased later in the morning session as Norwegian deliveries were fully restored following the problem at the Nyhamna processing plant.  September finished just over 2.00p higher day-on-day while contracts for the winter months gained by an average of 1.10p but fears of a repeat of Tuesday’s surge were not realised.  The UK system ran a supply surplus throughout the day as Norwegian deliveries ramped up and demand eased with increased renewable power generation.  Prompt gas prices still gained an average of 1.67p day-on-day.  

  GB power futures gained again

GB power futures gained again on Wednesday, but movement was limited by a modest reduction in emissions prices and an improving supply outlook.  Two nuclear generators at Heysham are due to return to service by August 31, reducing the recent high reliance on gas-fired plant.  Q4 gained £0.55/MWh while the full Winter 21 contract was up by just £0.10/MWh. Forecast higher wind availability saw the day ahead baseload power price fall by £3.00/MWh yesterday.  Wind generation is expected to top 5GW today, up from an average of 2.2GW on Wednesday.  

Crude oil benchmark prices increased

Crude oil benchmark prices increased for a third consecutive session on Wednesday with Brent gaining $1.20 to settle at $72.25 a barrel.  The global benchmark has gained over $7.00 over the 3 days and instead of threatening to go below $65.00, is now pushing towards the $72.50 mark.  West Texas has also gained strongly since Monday and was further boosted by weekly inventory data from the U.S. Energy Information Administration whose weekly inventory data showed a draw on both crude and gasoline stocks in the U.S. last week.  Following gains of over €3.00 per tonne in EU ETS unit prices over the previous 3 sessions, carbon prices slipped marginally yesterday.  

Demand on the UK gas system has fallen

Demand on the UK gas system has fallen some 20MCM below the seasonal norm and the system is well-supplied and is forecast 10MCM long for today.  Wind generation levels have picked up as forecast and combined renewable generation is running at 7GW this morning.  The lower demand situation is likely to see some easing of prompt gas prices, although no trades have been recorded as yet.  Early trades on the front month are showing a decrease of 1.64p on last night’s closing price while winter months traded so far are down by just over a penny.  Oil and carbon prices have also fallen overnight, and Brent crude is down 65 cents to $71.60 a barrel.