Positive news of Russian supply via Nord Stream 2 emerged

Prompt gas contracts gained

As has been the case in recent weeks, Monday saw UK gas prices surge higher but unlike previous weeks, prices fell back again later.  The market actually opened lower, but prices took off mid-morning with intra-day gains of up to 35.00p on contracts for the current winter months.  The market was driven by Gazprom’s failure to book additional capacity on pipelines transiting Ukraine and Poland for next month.  The surge was reversed in later trading however and prices fell back to settle 3.00 to 5.00p higher day-on-day as more positive news of Russian supply via Nord Stream 2 emerged with confirmation that commercial flows are ready to begin once certification is obtained.  Prompt gas contracts gained an average of 5.00p to remain at over 200.00p.

 Carbon prices fell

An improving supply outlook for GB power and falling carbon prices saw near futures baseload prices ease on Monday.  Demand on the GB system is forecast to remain below seasonal norms into November and the new North Sea Link with Norway is providing extra inter-connector capacity.  Carbon prices fell by almost €1.00 with contracts out to 2023 all finishing below €60.00 per tonne while UKA’s shed between £1.63 and £2.33 per tonne.  Below average demand and increased wind generation helped pull GB baseload prompt prices lower with the day ahead shedding £28.00/MWh while the week ahead was down by £30.00/MWh.

 Crude oil prices eased on Monday

Crude oil prices eased on Monday with Brent shedding 50 cents to settle at $84.33 a barrel.  As with the gas market, oil prices increased in early trading yesterday with Brent topping $85.00 for a time.  Despite tight supply-demand fundamentals, the market turned lower in the afternoon as investors sold on technical signals with prices above $85.00 a barrel.  Demand growth is difficult to determine precisely at the moment as both the International Energy Agency and OPED have revised projections for Q4.  The use of strategic reserves in countries such as China and India is muddying the true extent of demand growth but what is certain is that global demand has increased dramatically following the resurgence of economic activity post-lockdown.

 Near futures gas prices have opened lower

In much the same pattern as yesterday, near futures gas prices have opened lower but, so far, there is no sign of a price surge.  The front month is down by 4.32p in early trading.  Demand on the UK gas system remains around 10% below the seasonal norm and the system is finely balanced around forecast demand of 208MCM for today.  Renewable power generation is running at 10.5GW with wind contributing 9.6GW of that total.  GB gas-fired generation is drawing 54MCM while exports to mainland Europe are running at 68MCM this morning.  On the oil market, Brent crude has recovered yesterday’s loss and is trading at just under $85.00 a barrel.