A dip in temperatures is forecast to increase gas demand
Fears for the impact of renewed lockdowns in many European countries, and consequent demand suppression, fed through to the UK NBP on Friday with near contracts for the remaining winter months shedding around 20.00p. With Austria, Belgium, Germany and the Netherlands all invoking various degrees of restrictions, lower demand expectations alleviated some of the concerns over Russian supply for the winter months. Seasonal contracts for Summer 22 and beyond recorded losses of more modest proportions and the full year 2022 was down by 8.05p. A dip in temperatures is forecast to increase gas demand significantly this week and prompt gas losses were less than half the front month decline.
Near futures power prices on the GB market eased
Near futures power prices on the GB market eased with falling gas prices but losses were limited by carbon hitting record highs of over €70 per tonne. The ongoing gains in EU emissions prices is driven by heightened awareness of the need to set costs at levels which will help meet EU emission reduction targets by 2030. Day ahead baseload power gained £46.00 as wind is forecast lower from Monday. Lower wind availability had largely been factored into the week ahead price which gained only marginally compared to the day ahead.
The oil market finally broke below the $80 a barrel mark
The oil market finally broke below the $80 a barrel mark on Friday, having threatened to do so in previous sessions last week. Brent crude shed $2.35 on the day to settle at $78.89 while West Texas was down by $2.47 to $75.94 a barrel. The market was reacting to rising coronavirus cases in many parts of the world but particularly in Europe where demand is now expected to slow with fresh lockdowns being imposed in some countries. The strength of the dollar is also contributing to the downward pressure on oil prices. The U.S. appeals to other major oil consuming nations, including China and India, to release oil from strategic storage has so far fallen on deaf ears while OPEC+ continues to limit supply.
The UK gas market is continuing Friday’s decline
The forecast dip in temperatures materialised over the weekend and demand on the UK gas system has risen above the seasonal norm today. The system remains well-supplied however and is currently forecast 15MCM long over demand of 291MCM. Power demand is also up and, although wind generation is still supplying 7.25GW to the GB grid, gas-fired generation is running at over 19GW and drawing 85MCM of UK gas demand this morning. Despite the strong demand, the UK gas market is continuing Friday’s decline and the front month is down 7.25p in early trading. Brent crude is up 25 cents to currently trade at $79.14 a barrel.