Cargo traffic recommencement through Suez Canal eased European gas prices

 April contract shed 1.39pm on its penultimate day of trading as front month

  The refloating of the giant container ship which had blocked the Suez Canal and the recommencement of cargo traffic through the canal saw some easing in European gas prices yesterday. The UK NBP April contract shed 1.39p on its penultimate day of trading as front month. The Quarter 2 and full Summer contracts, which also expire today, fell by just over a penny per therm. Within day gas eased by 0.75p but remaining prompt contracts recorded marginal gains as wind generation levels are forecast to decrease, pushing gas demand higher. In a somewhat surprising move, crude oil moved higher with Brent gaining 41 cents to close at $64.98.  

 Prompt power prices gained sharply

Prompt power prices gained sharply with wind generation levels forecast to fall off for the remainder of this week and the weekend. The day ahead baseload contract gained £5.75/MWh as wind is expected to supply 5GW today, down from 10GW yesterday.  

 In a somewhat surprising move crude oil prices moved higher yesterday

Crude oil prices moved higher yesterday in a somewhat surprising move, given the resumption of shipping movement in the Suez canal in the early hours. An early dip in price was reversed and Brent crude settled 41 cents up on Friday’s close at $64.98 as the market responded to news that OPEC is likely to maintain production quotas when it meets later this week. The volumes of crude held up by the Suez closure were insignificant and the impact of a prolonged closure would only have meant delays of around 10 days as cargoes destined for Europe from the Gulf would have had to take the longer route around South Africa. Evidently, the market attached more importance to the broader supply/demand issues and extended production cuts.

Gas demand has reduced overall with warm weather

Warm weather has reduced overall gas demand despite a pick-up in gas-fired power generation as wind falls to roughly half of yesterday’s levels. Demand for today is forecast at just 212MCM with forecast supply running 12MCM long. Demand could be lower still but for a significant pull for storage injection which began yesterday. Early trading on the UK gas market suggests some possible downside but the April contract, which expires today, has traded flat to Monday’s close. Crude oil has eased fractionally overnight as the market awaits a decision from OPEC on Thursday as to whether to hold current production quotas. Carbon prices have edged marginally higher.