Crude oil contracts pulled away from its recent high

The NBP gas market made a valiant to recover some of the losses from the previous session

UK gas demand declined day on day as the projected increase in wind generation materialized and demand from conventional generation dropped.  As a result, forecast demand was projected at 220MCM with supplies running close to that figure and the system staying in balance throughout the day.  The NBP gas market made a valiant to recover some of the losses from the previous session and the market was up on opening.  At an early stage the front month March contract had added 1.95p but was unable to hold on to these gains.  At market settlement March was up by 0.63p at 40.66p per therm while the remainder of the curve added a half a penny on average.  

 The day ahead contract continued to weaken

GB power futures moved higher on Tuesday and recovered some of the losses from the previous session.  The increases on the power market reflected the stronger gas and crude oil markets.  In addition, increases in EUA carbon prices also provided support for the curve. EUA contracts added between 70 and 72 cents as this market pushed above €38.00 per tonne once again. The day ahead contract continued to weaken and shed £3.50/MWh as wind generation continued to grow and the power system remained comfortable. Wind generation out turned at 13GW well above the original forecast.  

Crude oil contracts added a modest amount of the premium extending the gains

Following the strong gains from the previous session, crude oil contracts added a modest amount of the premium extending the gains from the previous session.  Brent crude fell to a low of $65.37 but firmed once again in the afternoon as the market seems to be tracking the movement in the broader equity market.  With U.S. stocks declining over the course of the day some investment did come out of crude as contracts pulled away from its recent high.  To some extent many participants were staying on the sidelines in advance of the latest weekly U.S. inventory report due later today. The market will learn to what extent the Winter storms have impacted on stocks.  

Distribution demand has fallen in line with higher temperatures

The UK gas system is comfortable once again this morning with a surplus of 18MCM predicted on a forecast demand of 220MCM.  Distribution demand has fallen in line with higher temperature although demand from conventional generation has increased marginally.  The outlook for LNG deliveries remains positive as several tankers are due to dock in the UK in coming weeks.  LNG send out remains strong as a result and is running at 65MCM this morning.  The gas market has opened weaker and those contracts that have traded are showing some weakness.  The front month is down by 0.26p while April is priced at 40.05p, down by 0.35p from last night’s close.