This morning has seen some Russian gas flowing into Germany

09 November 2021

Demand on the UK gas system crept higher

The anticipated resumption of Russian supply via the Yamal pipeline failed to materialize yesterday, pushing Western European gas markets higher on the day.  Demand on the UK gas system crept higher, despite increasing wind generation over the course of the day on Monday.  Overall demand remained below the seasonal norm however as temperatures hovered just above normal.  Prompt gas prices at the NBP still gained an average of 6.00p while contracts for the current winter months averaged gains of 11.69p.  The gains were typical of movement on Western European markets which all responded to the lack of Russian supply via the Yamal pipeline.

 Baseload futures tracked gas and carbon prices higher

Baseload futures tracked gas and carbon prices higher on Monday with gains of £7.00/MWh on average for near futures.  The prospect of gas supply problems over the winter months if European storage levels do not improve is driving bullish sentiment on both gas and power markets currently. The day ahead baseload contract jumped by £28.00/MWh as wind generation was forecast lower for today.  The recovery in carbon prices, which gained over €1.00 per tonne yesterday, was also playing on the prompt power market yesterday.

Crude oil prices continued to gain in the wake of the OPEC decision

Crude oil prices continued to gain in the wake of the OPEC decision to limit production increases to 400,000 barrels per day for December.  The oil market was also supported by the passing of Joe Biden’s €1.2 trillion infrastructure package which is expected to boost transport demand in the States.  Along with this, the U.S. yesterday lifted its ban on travel from Europe for fully vaccinated people, providing a further boost for oil in the form of aviation fuel.  Brent crude gained 69 cents to settle at $83.43 a barrel while West Texas recorded a 50-cent gain to settle at $81.93 a barrel.  Carbon prices continued to recover with EU ETS unit prices gaining over €1.00 per tonne yesterday.

 Gas markets have responded by reversing some of yesterday’s gains

This morning has seen some Russian gas flowing into Germany via the Yamal pipeline but not in quantities sufficient for major storage replenishment.  The markets have responded by reversing some of yesterday’s gains and the NBP front month is down by 7.45p.  With temperatures above normal and wind generation holding up, demand on the UK gas system has fallen to 228MCM or 30MCM below the seasonal norm.  Prompt prices can be expected to ease in this scenario but there have been no recorded trades as yet this morning.  Oil continues to strengthen with Brent crude up by 62 cents overnight to currently trade at $84.05.