Crude oil has recovered some of Friday’s heavy losses

Gazprom has booked no firm capacity 

A variety of factors were at play on the markets on Friday.  In another bullish development, it was revealed that Gazprom has booked no firm capacity on the Yamal link to Germany for December.  A more bearish indicator came from weather forecasts which predict temperatures returning to normal this week and for early December.  The most telling development however was the detection of a new variant of Covid-19 which sent the energy markets into a downward spiral on Friday.  Gas prices fell with the remaining winter month contracts at the NBP shedding around 12.00p on average.  The day ahead contract was down by 15.00p while the full week ahead contract for this week shed 13.70p.  

 Power prices beyond the front month eased on Friday

Baseload power futures, with the exception of the front month, posted losses in line with falling gas and carbon prices on Friday.  With near futures gas prices shedding 5% on the day and carbon prices dropping by €2.38 per tonne, power prices beyond the front month eased on Friday but near futures remained around 10% higher week-on-week. The day ahead baseload power contract soared to £450/MWh on forecast high demand and low wind availability on Monday.  The full week ahead contract for this week fell by £15.25/MWh as temperatures are forecast to pick up as the week progresses.  

New variant of Covid-19 sent the energy markets into a downward spiral

The detection of a new variant of Covid-19 sent the energy markets into a downward spiral on Friday with day-on-day losses of over 10% on the oil market.  The market is again concerned for supply-demand balance, particularly in light of a slow-down in demand growth as countries re-impose lockdowns and restrict air travel.  The decision of OPEC+ on whether to increase production quotas when they meet later this week will no doubt have to take the renewed Covid situation into consideration.  Brent crude shed $9.50 to settle at a 10-week low of $72.72 while West Texas Intermediate was down $9.95 to $68.15 a barrel.  

Friday’s decline in gas prices has been recovered

Any hope that the new Covid variant would at least have a dampening effect on energy prices is quashed today.  Friday’s decline in gas prices has been recovered with interest as prices for the current winter months are up by around 17.00p in early trading this morning.  Demand on the UK gas system is running well above normal as wind generation has halved from Friday’s level.  Temperatures are rising however, and the system remains comfortably supplied.  Crude oil has recovered some of Friday’s heavy losses with Brent currently trading at just over $76 a barrel.  Carbon prices have also rebounded and EU ETS unit prices are trading around €75 per tonne.