UK prompt and futures markets moved in different directions

UK gas system was comfortably supplied throughout the trading day

UK prompt and futures markets moved in different directions on Monday with prompt prices gaining strongly on the day. While the UK gas system was comfortably supplied throughout the trading day, within day and day ahead contracts gained 16.50p and 16.90p respectively as gas-fired power demand moved higher and is forecast higher again today as wind generation is forecast to drop below 5GW. The futures market began the day with strong increases on the November and remaining winter months, but the market turned lower during afternoon trading and these contracts finished down by over 5.00p day-on-day.

Losses on the power market were limited to the current winter

Baseload power futures for the remaining winter months eased again but prices further out the curve recorded modest gains on Monday. The downside resistance was supported by rising carbon prices as EU ETS unit prices gained €1.10 per tonne. The carbon price recovery ensured that losses on the power market were limited to the current winter months. The day ahead index for today gained just over £1.00/MWh but the actual closing price was £16.00 higher day-on-day. The late surge in prompt power prices was the result of forecast falling wind generation for today, but this has yet to be evidenced.

Crude oil continued to strengthen with big early gains

Crude oil continued to strengthen with big early gains being pared back but still finishing over a dollar up on Friday’s settlement prices by close of business. West Texas Intermediate with a 7-year high of $82.17 intra-day before easing in late trading to settle at $80.52. Brent crude looked headed for the $85.00 mark before it too turned lower in the afternoon to settle $1.26 higher day-on-day at $83.65 a barrel. Increasing demand with more gas to oil switching, and limited increase in supply by OPEC+ looks set to maintain a tight supply-demand balance for the remainder of the year. Gas to oil switching accounts for only 10 to 20% of the demand increase, with economic recovery accounting for the rest, according to the International Energy Agency.

UK gas market has opened higher this morning

Demand on the UK gas system remains below the seasonal norm despite high gas-fired power demand. The system is forecast 10MCM long against demand of 200MCM, which is almost 10% below the norm for this time of year. The supply side is boosted by increased LNG send out which has risen to 28MCM this morning with LNG storage now at the same level as this time last year. As was the case yesterday, the UK gas market has opened higher this morning with gains of between 5.00p and 6.00p on the winter months. Crude oil has also gained overnight, albeit marginally, as Brent is up 15 cents to currently trade at €83.80 a barrel.