The market ignored the supply situation
As was the case earlier in the week, the market ignored the supply situation on the day and sentiment was driven by concerns for storage levels. Prompt and near futures gas contracts gained over 12.00p on the day and the front month was up almost 40.00p week-on-week. News of increased LNG deliveries over the coming fortnight helped relieve some of the concerns for the remaining winter months but the Summer and Winter 22 contracts recorded further strong gains to finish almost 50% higher week-on-week. Day ahead and week ahead for this week gained 12.50p while the balance-of-month contract also gained 12.50p with colder weather forecast to return for Week 52.
A modest recovery in carbon prices
GB power futures turned higher again on Friday with contracts for Summer 22 and Winter 22 gaining £10.50/MWh. The front month was up by just £4.00/MWh with the bigger gains on the seasonal contracts for 2022 mirroring movement in gas prices on Friday. A modest recovery in carbon prices also lent support to power prices on the day. Day ahead and week ahead contracts ticked higher as wind generation levels are forecast lower for this week and next. Average wind generation is forecast to fall from 11GW in Week 49 to 8GW this week and fall further to average 5GW in Week 51 when colder weather is also forecast.
Crude oil markets turned higher again
Crude oil markets turned higher again on Friday on hopes that the Omicron variant of coronavirus may be less fatal than the original. The severity of the new strain, and the effectiveness of existing vaccines, have led to optimism that further restrictions impacting economic activity may be limited and short-lived. The more bullish mood which has emerged in recent days has seen crude gain over $5.00 week-on-week as the market turned higher again on Friday with Brent gaining 73 cents to settle at $75.15. The carbon market recovered some of Thursday’s record loss with EU ETS unit prices gaining €2.50 per tonne on Friday.
Fears for a significant loss of Russian supply
Another week begins with a surge in gas prices taking the front month contract closer to 300.00p. On a day when demand has fallen below the seasonal norm, it is difficult to explain the rationale for the market movement today. Tensions between Russia, and Ukraine and its Western Allies, continue to cast a shadow over European gas markets with fears for a significant loss of Russian supply if conflict develops. On a more positive note, the UK gas system is well-supplied at the moment and is forecast 15MCM long over forecast demand of 260MCM. On the oil market, Brent has gained 50 cents in early trading to currently trade at $75.65 and EUA’s are up by €1.50 per tonne on Friday’s closing levels.