Carbon prices surged higher in the aftermath of COP 26

Gas prices rose on Monday

Gas prices rose on Monday as news emerged that Gazprom has booked no additional capacity on pipeline entry points to Western Europe for December.  This suggests Gazprom’s storage facilities in Germany and Austria will remain depleted over the winter months and contracts for the winter months at the NBP gained an average of 10.43p yesterday.  A comfortably supplied UK gas system yesterday morning fell short in the afternoon and this, combined with forecast lower temperatures, pushed prompt and near futures gas prices higher.  The day ahead price gained 22.00p to top 200.00p again and week ahead was up 24.00p to finish just under that mark.

The IFA 2 interconnector with France remained offline

GB power futures felt the full impact of rising gas and carbon prices on Monday with contracts for the remaining winter months gaining an average of £12.79/MWh.  Carbon prices surged higher on Monday in the aftermath of COP 26, with EU ETS unit prices gaining over €3.30 to finish at new record highs of €66.80 to €67.90 per tonne. The day ahead baseload price eased as wind generation is forecast to pick-up today.  Wind generation averaged only 2GW yesterday but is forecast to exceed 5GW today.  The IFA 2 interconnector with France remained offline due to a strike by French workers.

Oil prices fell for a second consecutive session

Oil prices fell for a second consecutive session as downward pressure continued following the consensus from the COP 26 meeting favouring the banning of fossil fuel subsidisation.  The steady rise in the dollar versus other major currencies has also maintained downward pressure on prices as it makes oil products more expensive for non-dollar based economies.  Brent crude shed $1.10 to settle at $81.07 as the dollar hit a 16-month high of 1.1385 against the euro.  Carbon prices surged higher on Monday in the aftermath of COP 26, with EU ETS unit prices gaining over €3.30 to finish at new record highs in a range between €66.80 and €67.90 per tonne.

Demand on the UK gas system has increased overnight

As temperatures fall closer to seasonal norms, demand on the UK gas system has increased overnight.  A modest increase in wind availability has partly offset demand for gas-fired power generation and the UK gas system is forecast 5MCM long for today.  The gas market is more focussed on supply over the winter months however and concerns arising from weak Russian supply to Western Europe and failure to replenish storage stocks in Germany and Austria.  On the positive side, increased LNG deliveries to the UK and Western Europe generally, is tempering these concerns.  Near futures gas prices at the NBP are still moving higher with gains averaging 9.00p in early trading this morning.