UK gas market settled lower week-on-week

Prompt gas prices eased on forecast higher temperatures

A second day of below normal temperatures pushed demand on the UK gas system to a season-to-date high of over 240MCM on Friday, but the supply side maintained a surplus for most of the trading day. Prompt gas prices eased on forecast higher temperatures for this week and near futures were down on an improving supply outlook with LNG deliveries set to increase over the coming 3 weeks. The improving outlook for UK gas supply saw the UK market settle lower week-on-week for the first time since August. Contracts beyond the current winter recorded marginal gains on the day and were little changed week-on-week.

 Baseload power prices for the current winter month eased marginally

Baseload power prices for the current winter month eased marginally on Friday despite a rebound in carbon prices on the day. Losses on the day were curbed by gains in carbon EUAs as contracts settled an average of 75 cent per tonne higher. Contracts beyond the current winter months were little changed day-on-day but settle marginally lower week-on-week. The day ahead price was little changed but week ahead for this week gained £12.00/MWh as wind generation was forecast lower this week. Wind fell off to under 5GW on Friday before rising to almost 10GW on Sunday but is forecast to decline over the early days of this week

Crude oil gained for a seventh consecutive week

Crude oil gained for a seventh consecutive week as Brent gained 92 cents to settle at $85.53 as supply-demand fundamentals remain largely unchanged. A modest decline in the dollar exchange rate against other major currencies helped crude prices gain on the day while the week-on-week increase was marginal. The continuing release of strategic stocks of crude in major consuming nations such as China and India is causing some uncertainty around the true extent of demand growth. This factor should be short-lived however and a more accurate view of the supply-demand situation should emerge before year end. EU ETS unit prices gained 75 cents to move to just under €60.00 per tonne on Friday.

Crude oil has also strengthened in early trading today

Temperatures rose over the weekend and wind generation also increased, easing demand on the UK gas system. Demand for today is forecast at just under 230MCM, although deliveries are lagging and the system is currently forecast 2.5MCM short for today. Renewable generation is contributing 10GW this morning but wind is forecast to reduce over the course of the day. Prompt gas contracts have yet to trade but near futures prices have gained strongly in early trading with the front month up by 11.28p. Crude oil has also strengthened in early trading today with Brent up by 62 cents to $86.15 a barrel.