Friday’s decline in gas prices was recovered with interest

Wind generation was down to half Friday’s levels

Demand on the UK gas system rose to almost 350MCM, or 60MCM above the seasonal norm yesterday.  Temperatures remained below normal and wind generation was down to half Friday’s levels in the morning, although wind did pick up in the afternoon.  Friday’s decline in gas prices was recovered with interest yesterday as fresh concerns over winter supply and a UK system deficit saw prompt and near futures contracts gain 13.00 to 19.00p.  Supply concerns stemmed from the fact that Gazprom has booked no firm capacity on the Yamal link to Germany for December, leading to increases of over 5% on most Western European gas markets on Monday.

Baseload power futures rebounded

Baseload power futures rebounded from Friday’s losses with support from rising gas and carbon prices on Monday.  Contracts for December and January gained £15.25/MWh and £17.25/MWh and Q1 22 was up by £10.75/MWh.  Seasonal contracts for Summer 22 and beyond saw more modest gains averaging £2.75/MWh. The day ahead baseload power contract fell back to levels seen midweek last week as wind generation is forecast to exceed 10GW today.  Rising temperatures are also expected to ease power demand for the remainder of this week.

 Carbon prices recovered more of Friday’s losses

Crude oil markets looked destined to recover much of Friday’s sharp losses as prices gained over $4.00 in bargain hunting early yesterday.  The early gains were largely retraced however as the market remains 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 settled 72 cents higher at $73.44 a barrel.  Carbon prices recovered more of Friday’s losses with EU ETS unit prices gaining €1.50 per tonne.

Demand on the UK gas system has fallen

With rising temperatures and increased wind availability, demand on the UK gas system has fallen back to normal for this time of year.  The UK gas system is running 16MCM long which should help reverse some of yesterday’s strong gains on NBP prompt contracts.  There is no such prospect on the futures market however as the new front month contract for January has gained 13.56p in early trading.  This, despite an encouraging outlook for LNG supply with 10 deliveries due at UK terminals by mid-December.  The oil market is trading lower this morning with Brent crude down $2.30 to $71.14 a barrel.