The gas market is once again in bullish mode

UK gas market saw another day of fluctuating prices

The UK gas market saw another day of fluctuating prices but this time the end result was a decline in near term futures contracts with the Q1 2022 contract shedding almost 13.00p day-on-day.  The near futures market was impacted by a sharp downturn in carbon prices on the day as EU ETS unit prices shed over €10.00 per tonne.  Seasonal contracts at the NBP were oblivious to the emissions market on Friday with Summer 22 gaining 11.33p and Winter 22 up by 12.47p.  On the prompt, rising demand as a result of higher gas-fired power generation due to low wind availability, led to increases averaging 3.50p on the day.

Front month power prices fall on Friday

A forecast for milder weather than previously predicted for the next 2 weeks and falling emissions prices saw prompt and front month power prices fall on Friday.  The relief was fractional compared to Thursday’s gain of over £100/MWh on the January contract.  Ongoing concerns for tighter system margins seem certain to keep January and Q1 prices at extremely high levels. Day ahead GB baseload did gain £20/MWh but the full week ahead contract for this week shed £50/MWh.  The day ahead was driven by forecasts for very low renewable generation today, but wind is forecast to pick up slightly for the rest of the week.

Downward pressure on oil prices on Friday

The carbon market nose-dived on Friday with EU ETS unit prices shedding 12.5% in value on the day.  On the oil market, gains made on Wednesday and Thursday were reversed as Brent crude shed $1.50 to settle at a low for the week of $73.52 a barrel.  The U.S. benchmark, West Texas Intermediate, recorded a similar decline on Friday, settling at $70.72 a barrel.  Concerns regarding the ongoing threat of the Omicron strain has seen some major countries announce further restrictions on travel and this, combined with a strengthening dollar exchange index, added to the downward pressure on oil prices on Friday.

Carbon prices are recovering a little from Friday’s steep losses

A steep rise in heating demand overnight has seen demand on the UK gas system forecast at 328MCM today.  Forecast deliveries were lagging by almost 20MCM at 0900 and the gas market is once again in bullish mode with the front month up by 26.26p on Friday’s closing level.  Prompt contracts have yet to trade but will almost certainly see strong gains if the current supply deficit persists.  The accelerating spread of Covid via the Omicron strain has further heightened concerns for oil demand and Brent crude has dipped below $70.00 a barrel in early trading today.  Carbon prices are recovering a little from Friday’s steep losses.