UK gas prices moved in different directions on the near and far curve
For a second consecutive day, UK gas prices moved in different directions on the near and far curve. Contracts for the remaining winter months shed an average of 13.18p on Friday but were little changed week-on-week. Seasonal contracts for Summer 22 and beyond all gained on the day and recorded more substantial gains week-on-week. The near term easing reflects a slightly more optimistic market outlook for winter gas supply with LNG deliveries reaching their highest levels since 2019. The strong LNG deliveries coupled with steady, albeit small capacity bookings by Gazprom on the German border, saw prompt prices turn lower gain on Friday. Day ahead and week ahead shed 7.00p and 9.00p respectively while the balance-of-month contracts shed 6.00p.
Prompt power products eased
GB baseload power futures at the front of the curve shed some value in line with losses on the gas market and carbon markets. As with the gas market however, power contracts beyond the current winter months gained with Q2 22 up by almost £5.00 day-on-day and £10.00/MWh week-on-week. Carbon prices fell back below €80.00 per tonne. Prompt power products eased as wind generation is forecast higher and demand lower on rising temperatures this week. Supply margins are expected to be more generous as demand is due to ease as temperatures rise to around the seasonal norm and wind is forecast to average around 10GW.
Carbon prices slipped back from Thursday’s record highs
Crude oil prices rallied in early trading on Friday on speculation that OPEC might cut production levels if the new Covid variant impacted demand. Brent moved above $70 a barrel and remained above that mark for most of the trading day before slipping to settle at $69.88. A minor slippage in the dollar exchange rate versus other major currencies helped reverse the earlier gains. Commodities markets remain under pressure as more Covid 19 related restrictions impact on future demand prospects and oil is particularly exposed to that pressure as demand is challenged on many fronts, primarily transport and industrial use. Carbon prices slipped back from Thursday’s record highs to settle at just under €80.00 per tonne.
Near futures gas contracts are trading lower this morning
While temperatures have risen to near normal levels for this time of year, demand on the UK gas system is still some 10% above the seasonal norm this morning. The system is forecast long thanks to a robust LNG send-out of 80MCM and wind generation levels of just under 10GW are also helping the supply-demand balance today. In what looks like a repeat of the market movement on late last week, near futures gas contracts are trading lower this morning while seasonal contracts are showing signs of rising based on current bid-offer spreads. Crude oil is definitely on the up with Brent clearing the $70 mark with early gains of $1.94 to currently trade at $71.82 a barrel.