Early softening in gas futures at market opening was reversed
Despite lower wind availability on Monday, UK gas demand fell back from Friday’s levels as temperatures picked up slightly. An early supply surplus of 22MCM was eroded as demand increased over the course of the day but the system still finished 2MCM long. The spot price recorded a modest gain but remaining prompt gas prices recorded strong gains with day ahead, balance- of-week and balance-of-month all settling above 210.00p. Langeled flows reached a new high as production from the Troll and Oseberg fields stepped up but most of the increased output went to the near continent. An early softening in gas futures at market opening was reversed but movement was modest compared to recent days and weeks.
Futures baseload power contracts recorded gains
Futures baseload power contracts recorded gains in line with rising gas and carbon prices on Monday with mid-winter prices nearing £250/MWh. The elevated prices look set to continue until gas storage levels are increased as more LNG starts arriving in the UK and Western Europe. Carbon prices gained with rising gas and oil prices yesterday as Brent crude broke above $80. The day ahead baseload contract eased with a pick-up in wind and as the new North Sea Link with Norway began imports to GB. The new interconnector was flowing at half its rated capacity of 1.4GW as it undergoes trials but will help ease the wind deficit forecast for later this week.
Brent crude broke through the $80.00 mark
Crude oil prices climbed to their highest settlement levels in 3 years as Brent crude broke through the $80.00 mark on Monday. The global benchmark gained $1.98 to settle at $81.26 while West Texas Intermediate gained $1.71 to settle at $77.59 a barrel. There was some minor slippage in the dollar exchange rate but the main driver of prices on the day was the decision by OPEC and its partners to leave current production quotas unchanged. The cartel had been expected to raise production levels in light of increasing global demand but instead the outcome was to squeeze more from the market in the ongoing tightly balanced supply-demand situation.
Brent crude has gained a further overnight
An early supply deficit on the UK gas system this morning saw near futures gas prices open sharply higher. Although demand has eased slightly and the supply side has caught up, early gains on November, December and January contracts remain at over 20.00p. Wind generation has picked up to almost 10GW and is helping reduce gas demand but wind availability is forecast to fall off from tomorrow. The new North Sea Link supplying power from Norway is helping to improve supply margins on the GB grid, although still running at just half its 1.4GW capacity. Brent crude has gained a further 50 cents overnight to currently trade at $81.76 a barrel.