Carbon EUAs remain volatile

20 February 2023

Weak demand and ample supplies continued to pressure gas prices

Weak demand and ample supplies continued to pressure gas prices in Europe and the UK on Friday.  On the NBP, prompt prices softened with the spot and day ahead closing 8.55p and 5.00p lower as both contracts settled below 120.00p. Forecasts for strong output from wind generation along with mild temperatures weighed, while LNG supplies are expecting to be topped up by 11 tankers before March 3rd. After declining by 7.74p on Thursday, the March contract remained closely aligned to the prompt and shed a further 8.55p on Friday to settle just above the 120.00p mark and bring the week’s decline to 13.55p.  The summer contract lost 6.74p to close at 125.86p on Friday.  

 GB baseload power futures fell for a second day on Friday

GB baseload power futures fell for a second day on Friday as the market responded to weakness in wholesale gas prices across Europe and the UK.  The March contract yielded £4.50/MWh on the day and closed at £113.50/MWh, while the summer settled at £135.00/MWh, down by the same amount.  Carbon EUAs retraced some of the steep gains from the previous sessions and settled 1.8% lower on average. Baseload for the day ahead settled flat on Friday with forecasts for wind generation to remain above recent averages.  Last week wind generation averaged 11.1GW in the UK and is forecast at over 16.0GW for Monday.

 Crude oil prices extended losses on Friday

Crude oil prices extended losses on Friday racking up a four-day run of declines.  Brent recorded modest losses earlier in the week, but the April contract fell by over $2.00 a barrel, ending the week $3.39 a barrel lower.  Market jitters have resurfaced with concerns that further U.S. interest rate increases will dampen oil demand.  On the supply side, the U.S. rig count fell by one last week but at 760 is 18% up on active rig levels at this time last year.  Reports have emerged that Russian oil producers are expected to maintain exports at current output levels despite Moscow’s announcement that production would be cut from March. The April contract for Brent settled at $83.00 a barrel, down $2.14 a barrel.  

 Near futures have opened firmer

The GB gas system is forecast 17MCM long today against the forecast demand of 264MCM. Early trading has shrugged off the comfortable supply and near futures have opened firmer, with March 4.25p per therm up at 125.21p.  The summer has traded sparingly, last exchanging at 128.90p, up 3.04p.  Prompt prices are flat this morning, but the spot is 0.50p down from Friday’s close.  In the crude oil markets, the April contract for Brent is up 57 cents to $83.57 a barrel.  Carbon EUAs remain volatile, and the Dec-23 contract is trading higher at €96.92 per tonne but is down from an earlier high of €98.21 per tonne.  
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