UK gas market experienced a significant downward correction
The UK gas market experienced a significant downward correction yesterday as the short-term supply outlook improved. Prompt and near futures contracts shed 18 to 22 pence per therm on Thursday as near term supply is forecast to improve with increased UK indigenous deliveries and falling demand due to increased wind generation levels from today and over the weekend into next week. While the day-on-day losses were significant, the 5-day average price movement remains at over 10% and the medium term supply outlook remains uncertain, leaving the market with an underlying bullish sentiment.
Carbon prices eased for a fifth consecutive day
Falling natural gas and emissions prices lead GB power prices sharply lower on Thursday with near futures contract shedding an average of £20.00/MWh. Q4 21 and Winter 21 contracts shed £19.25 and £19.00/MWh respectively but both remained above £150/MWh on settlement. Carbon prices eased for a fifth consecutive day. The day ahead contract fell dramatically on forecast higher wind generation and wider supply margins today. The weekend and week ahead contracts also saw significant easing as wind generation is forecast to remain higher for the coming week.
The oil market retained recent gains yesterday
The oil market retained recent gains yesterday as little new directional influences emerged. Exchange rates remain very stable with the Dollar-Euro exchange rate trading within a 10 cents range for over 3 weeks now. The market continued to assess the damage caused by recent storms in the Gulf of Mexico. Storm Nicholas has caused more onshore refining capacity to be shut-down in addition to that not yet recovered from Hurricane Ida. Front month Brent crude gained 21 cents to settle at $72.67 while West Texas Intermediate remained above $72.50 a barrel. Carbon emissions prices slipped a little further yesterday with EU ETS unit prices for 2022 and 2023 settling below €60.00 per tonne.
Demand on the UK gas system has fallen overnight
Demand on the UK gas system has fallen overnight as wind power generation has risen to 5GW, leaving gas-fired generation below 50% of total demand this morning. The system is again well-supplied but the market remains volatile. Bid-offer spreads on the prompt suggest increases of up to 9.00p following yesterday’s sharp downward adjustment. Near futures contracts have also opened higher with the front month up by 6.97p on last nights close. The oil market is moving in the opposite direction with Brent crude down by 50 cents overnight while carbon emissions prices have also eased a little.