Oil market has a keen eye on the progress of talks in Vienna

UK gas system was once again well supplied

The UK gas system was once again well supplied during yesterday’s market with plentiful supplies of LNG and high wind generation offsetting demand from conventional gas generation.  The system opened with a surplus of 16MCM and as the day progressed this grew to over 20MCM.  The gas market was not impressed with the favorably supply/demand balance and opened with a 5.00p gain for near term and Summer 2022.  There were few takers at this price level and prices fell gradually over the course of the session as buyers were staying away.  At market settlement prices at the front of the curve were marked down by just under 7.00p with the bears prevailing on the day.

Wind generation levels expected to decline

The GB baseload power curve moved in the same direction as the wider energy complex as initial gains were reversed intra-day.  The power system remains in positive territory as renewables maintain of significant position on the overall stack.  This is expected to change in coming days with wind generation levels expected to decline by 15% in coming days. On the market baseload futures fell by £4.25 and £2.30 for the front two months while remaining contracts gave up just over £2.00 of premium on average. The power prompt went in the opposite direction as the day head contract firmed by £4.50 to £172.25/MWh.

Crude oil futures extended losses for the second session

Crude oil futures extended losses for the second session in a row and rather than challenging the much vaunted $100 a barrel mark actually fell below the $90 mark as it traded to a low point of $89.93.  The traded range between the high and the low was $3.00 as at one-point brent crude reached a high $92.93.  The oil market has a keen eye on the progress of talks in Vienna between the US and Iran to resolve their differences over the latter’s nuclear ambitions.  There are some potential signs of progress, and the return of Iranian crude oil production could potentially allow a further 2 million barrels a day back to the market.

Gas market is relatively stable at the moment

The gas market is relatively stable at the moment with those contracts that have traded thus far staying close to last night’s settlement.  There has been little trading so far and the market has yet to find a definite direction.  On the supply side demand is forecast at 366MCM and the system is operating in balance at the moment.  The LNG sector is supplying over 50% of all gas this morning which is not surprising given the steady stream of LNG tankers that are arriving in the UK.  Gas supplies from Norwegian sources are contributing 33% as the second major source.  Crude oil markets are trading flat at $90.60 a barrel.

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