Carbon prices eased a little on Friday

Mild weather reduced gas demand

Several unplanned outages on Norwegian facilities reduced gas supply to Germany, Belgium and the Netherlands on Friday and exports via UK interconnectors stepped up sharply.  Wind generation levels of over 13GW and mild weather reduced gas demand on the day and Western European gas markets traded within tighter margins despite the threat from the Belarus President to cut Russian supply transiting his country.  Near futures contracts at the UK NBP settled just over a penny higher on the day and just under 5.00p higher week-on-week.  Day ahead gas for today was up by 5.00p but the week ahead contract for this week was unchanged.

GB power prices recorded modest gains

As with the UK gas market, GB power prices recorded modest gains on Friday to finish slightly higher week-on-week.  Near futures contracts gained an average of £2.85/MWh but seasonal contracts for Summer 22 and beyond recorded mixed movement.  Carbon prices eased a little, retreating from the €65 per tonne which seemed to beckon as COP 26 drew to a close.  The day ahead baseload price surged higher on the day, gaining over £100/MWh as wind generation is forecast to collapse today.  Wind generation exceeded 10GW on Friday and reached 12GW at times over the weekend but is forecast to fall below 5GW today.

 COP 26 meeting favoured banning fossil fuel subsidisation

The oil market ended a see-saw trading week with week-on-week losses of just over 50 cents.  Brent crude shed 70 cents on Friday to settle at $82.17 while West Texas was down 80 cents to $80.79 a barrel.  Downward pressure on oil came as the consensus from the COP 26 meeting favoured banning fossil fuel subsidisation.  The steady rise in the dollar versus other major currencies has also maintained a lid on upward potential for oil prices as it makes oil products more expensive for non-dollar-based economies.  Carbon prices eased a little on Friday, with EU ETS unit prices retreating from the €65 per tonne which seemed to beckon as COP 26 drew to a close.

Uncertainty over Russian supply to Germany continues

The forecast collapse in wind availability for power generation has materialised with wind contributing just 1GW to the GB grid this morning.  This is down from 13GW on Friday and gas demand for power generation has increased proportionately.  The return of full Norwegian supply to Western European hubs has eased the export demand on UK interconnectors and the UK gas system is comfortably supplied today.  Uncertainty over Russian supply to Germany continues to dog the gas market and the front month has opened 8.25p up on Friday’s close.  Crude oil continues to weaken in the wake of COP 26 while EU emissions prices are strengthening.