Gas demand was over 10% above the seasonal norm
Gas demand was over 10% above the seasonal norm of 280MCM on Tuesday as cooler temperatures and low wind generation added to the demand. The prompt market rose by an average of 12.00p per therm in response to the forecast for the cold snap to run into the weekend despite the GB gas system operating with a surplus for much of the day yesterday. Trading on the front of the curve was brisk from the get-go, with early increases being extended through the session leaving the December contract to close at 229.05p, up 17.88p. Reports that show the establishment of La Nina in Pacific may have added to concerns for winter demand as this weather event has been known to influence winters in the northern hemisphere.
Higher coal and crude oil prices added to the mix
The cold snap that supported the NBP prompt and futures markets propped up the power curve on Tuesday. Higher coal and crude oil prices added to the mix while carbon EUAs eased by around 0.4% which curbed gains slightly on the day. The front month settled £11.00/MWh higher, while contracts from the summer out averaged increases of less than £2.00/MWh. Wind generation is forecast to remain below average for today but will be higher than originally expected and the day ahead product eased to close below £200.00/MWh. Wind made up 8.2% of demand yesterday with gas fired generation ranking highest in the stack at over 50%.
India and Japan also indicated they would free up their own reserves
Crude oil prices consolidated Monday’s increase with further gains on Tuesday as the market appeared to be disappointed with the volume of strategic reserve release from the U.S. and some other high consumers. The number one oil consuming nation led the call for tapping strategic reserves and yesterday it was reported that the U.S. would release 50 million barrels per day. India and Japan also indicated they would free up their own reserves but the total falls far short of 100 million barrels per day which the market had already priced in. With OPEC+ threatening to counter these moves Brent added $2.61 a barrel yesterday to close at $82.31 a barrel.
Gas demand in the UK is down on yesterday’s level
Gas demand in the UK is down on yesterday’s level as wind generation is contributing more than originally forecast this morning. The supply side is forecast at 309MCM which is 14MCM long. Prompt products have been sluggish to open with only the balance of month having traded and that contract is around 7.50p higher. Near futures on the NBP have reversed off opening highs and are currently around a penny below last night’s close. In the crude oil markets, both benchmarks are currently around 25 cents a barrel down although trading has been choppy all morning and the market could go either way today.