Carbon EUAs shed premium

01 November 2022

The near curve contracts fell

The unseasonably mild weather across Europe has curtailed gas demand in recent weeks leaving the continent better supplied heading into the winter.  LNG deliveries have also ramped up and this could see the new front month for the NBP, December, come under pressure.  The near curve contracts fell by an average of 9.3% yesterday with December settling at 300.74p, it’s lowest since mid-June.  The winter contract for next year shed 22.40p yesterday and contracts past this recorded more modest losses.  Forecasts for wind generation to rise above recent averages weighed on the day ahead product yesterday as the contract bucked the trend for the prompt and declined by 10.55p.

Friday’s gains to baseload futures were reversed yesterday

Friday’s gains to baseload futures were reversed yesterday as the front months tumbled in response to the improved supply outlook heading into the winter.  The November contract shed £80.00/MWh on its last day of trading as front month and settled at £200.00/MWh.  Carbon EUAs also shed premium on the day with the spot down by €2.55 per tonne to €79.30. Baseload for the day ahead posted a gain on Monday despite forecasts for wind generation to rise above recent averages.  Wind generation is expected to supply over 40.0% of GB power today while gas fired generation will drop to around 20.0% of the stack.

 The crude oil markets settled lower

The crude oil markets settled lower for a second session on Monday as fears of a slowdown in China were confirmed by the latest economic data for October.  China’s purchasing manager’s index for October contracted while manufacturing also fell during the month on the back of the world’s second largest oil consumer’s zero-Covid policies.  Output from the U.S. climbed close to 12m barrels per day during August, the highest since the start of the Covid pandemic according to U.S. government reports and this also pressured crude oil prices yesterday.  At the close, Brent for December delivery was down $0.94 a barrel at $94.83, the January contract which assumes front month status from Tuesday settled at $92.81 a barrel.

NBP futures have also opened in retreat

GB gas demand is forecast at 212MCM for today which is around 100MCM below the seasonal norm for early November.  Supplies are healthy and currently 17MCM long according to the National Grid.  Prompt prices have opened softer with the spot and day ahead contracts down by 25.05p and 11.50p respectively.  NBP futures have also opened in retreat with December last trading at 283.00p, down 17.74p from Monday’s close. The first quarter for 2023 is down by a similar amount and contracts for the seasons have yet to trade. Brent for January delivery has recovered $1.57 a barrel this morning but is still below yesterday’s final price for December.
Read more carbon market news in our Insights section