Carbon EUAs resumed the bullish trend

 Gas supplies expected to remain tight across Europe for the remainder of May

With gas supplies expected to remain tight across Europe for the remainder of May, gas prices on the NBP resumed an upward trend after taking a breather on Tuesday.  Norwegian maintenance is to step up for the back half of May while storage facilities are expected to reinject supplies to replenish low stock.  The UK gas system flipped from being short in the morning to running long later as demand ran 19.5% above the seasonal norm.  Temperatures are expected to remain below the norm until the end of the week and this also played into the prompt yesterday which settled between 0.85p and 1.45p higher.  NBP futures reversed the timid losses seen on Tuesday while gains were consolidated through the session as the front month closed 2.13p up.

 Baseload power trended upwards on Wednesday

With higher gas prices and carbon EUAs firming, baseload power also trended upwards on Wednesday.  Contracts across the power curve settled an average of £0.70/MWh higher yesterday with the front month closing at £69.15/MWh up £0.60/MWh.  Carbon EUAs resumed the bullish trend as contracts added between 1.4% and 1.8% as the spot closed at €49.35 per tonne. As wind generation is expected to fall further on Thursday, baseload power for the day ahead gained over £4.00/MWh to settled at £73.14/MWh.  Wind generation was above 5.0GW yesterday and is forecast to supply less than 10.0% of the demand of 35.7GW for today.  

Larger than expected drop in U.S. crude oil inventories failed to drive crude oil prices higher

A larger than expected drop in U.S. crude oil inventories failed to drive crude oil prices higher on Wednesday as both benchmarks settled relatively flat.  Expectations had been for a 2.3 million-barrel fall in reserves but the Energy Information Administration reported U.S. crude inventories had declined by 8 million barrels last week. U.S. exports set a new peak since March 2020 while refining activity was the highest reported in over a year.  Brent has met resistance at the $70 a barrel marker for some time as the market is still wary of the growing number of new cases of Covid-19 in countries like India and Japan, which are the third and fourth largest importers of crude oil.  

 Crude oil prices have eased this morning

The UK gas system has opened 24MCM short this morning as demand is pitched at 249MCM for today.  Imports through the Balgzand Bacton Interconnector, from the Netherlands are down to zero today from around 12MCM yesterday while supply from storage facilities is also down this morning. Only the spot has traded in the prompt market and that product has reacted to the system deficit and is up 2.88p on last night’s close.  NBP futures have firmed in early trades too, with the front month, June, last trading at 62.60p. In contrast, crude oil prices have eased over the last hour with Brent 22 cents a barrel down at $68.74 a barrel.