Encouraging news of progress towards approval of the Nord Stream 2 project
The encouraging news of progress towards approval of the Nord Stream 2 project last week was boosted by news on Friday that Russia is about to increase injection rates to storage reserves in Austria and Germany. Gazprom has almost reached target storage capacity in domestic storage facilities in Russia and will ramp up injection to its facilities in Western Europe next week. Thursday’s sharp decline in gas prices was surpassed on Friday as near futures contracts shed a further 15% on the day to finish around 25% lower week-on-week. The new front month contract for December shed 31.30p to settle at 165.98p while Q1 2022 was down by 30.17p to 161.45p.
GB baseload power prices fell heavily for a second consecutive day
GB baseload power prices fell heavily for a second consecutive day on Friday leaving front month and Q1 22 prices down by £37.00 and £51.00/MWh week-on-week. Falling gas prices as a result of an improved supply outlook were responsible for the power market losses on Friday as carbon prices were little changed day-on-day. The day ahead baseload price shed £32.00/MWh as wind generation levels were forecast higher again today. Lower temperatures are forecast to lead to increased demand this week and the French inter-connectors are expected to switch to import to Britain.
The decline in crude oil prices was stemmed on Friday
The decline in crude oil prices was stemmed on Friday with Brent crude gaining 6 cents on the day to settle at $84.38, or $1.15 a barrel lower week-on-week. Last week’s modest reversal of the recent upward trend on the oil market was posited on the fear of a supply surplus as OPEC+ continues to increase production rates month-on-month but also on the prospect of increased Iranian output if renewed talks between the U.S. and Iran lead to an easing of sanctions. West Texas recorded a more significant gain, rising by 76 cents to settle at $83.57 a barrel, little changed week-on-week. The rebound in West Texas was a belated response to the decline in gasoline and distillate stocks revealed in last week’s inventory data from the U.S. Energy Information Administration.
Another bad start to the week’s trading on the UK gas market
Another Monday and another bad start to the week’s trading on the UK gas market. Despite some very positive news on the supply side which saw near futures prices decline by 25% last week, the market has turned upwards again this morning. Cooler weather has set in and LDZ demand has hit its highest level since March but high wind availability is largely off-setting this with renewable power generation at more than double gas-fired power this morning. The UK gas system is forecast 30MCM long and LNG deliveries are back to normal levels for this time of year but the new front month contract has gained 16.79p in early trading. The oil market is more stable as traders look to developments at the COP 26 meeting in Glasgow.