Christmas sales started early on the UK gas market

 The sharp downward slide continued

The Christmas sales started early on the UK gas market with combined losses of over 150.00p on Q1 22 contracts on the 23rd and 24th of December.  The sharp downward slide continued with market reopening yesterday with Q1 down by almost 33.00p.  An improving supply-demand situation has driven prices lower in recent days and that situation looks set to continue into early January with increased LNG deliveries to Western Europe compensating for lower Russian supply.  High wind availability has pushed gas-fired power generation into third place in the generation stack with nuclear producing 1GW more than CCGT and wind producing over double the gas-fired plant output yesterday.

 Prompt and near futures contracts continued to tumble

High wind availability has pushed gas-fired power generation into third place in the generation stack with nuclear producing 1GW more than CCGT and wind producing over double the gas-fired plant output yesterday.  Prompt and near futures contracts continued to tumble with Q1 22 down by £77.75/MWh. With wind generation peaking at 14GW, more than double the gas-fired contribution to the GB power stack yesterday, prompt power prices tanked.  Day ahead was down £50 to £150/MWh, its lowest in 8 weeks, while the week ahead was down £80 to £250/MWh.

Crude oil continued to strengthen

Crude oil continued to strengthen with Brent crude settling at $79.23, up by over $5.00 over the last 5 sessions.  Yesterday’s increase was more modest as the market experienced conflicting drivers from soaring coronavirus cases and a drop in U.S. stock levels, the latter suggesting some increase in demand.  Crude oil stocks fell by 3.6 million barrels while gasoline and distillate stocks were both down by 1.5 million barrels. U.S. crude production continues to rise and was reported to be approaching 12 million barrels per day last week.  Carbon prices recovered most of last week’s losses with EU ETS unit prices gaining almost €4.00 to settle above €80.00 per tonne again.

Gas and power demand are well below the seasonal norm today

With mild weather prevailing in Britain and Ireland, gas and power demand are well below the seasonal norm today.  Wind generation continues to dominate the GB power stack, generation 13GW this morning.  Gas demand for power generation is running at just 16MCM and overall gas demand is 240MCM this morning with the system forecast 22MCM long for today.  Gas market activity is sluggish so far with no trades on the prompt as yet and limited volumes moving on the futures market.  Prices are down marginally on last night’s closing levels.  Oil prices have also seen some slight easing overnight.      

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