Demand on the UK gas system has risen

 The positive supply margin helped prompt gas prices fall

With temperatures rising above the seasonal norm on Friday, demand on the UK gas system remained below 300MCM and a positive supply margin prevailed throughout the trading day. The positive supply margin helped prompt gas prices fall by an average of 2.00p while the new front month contract for March was down by 1.91p on the day and by 3.66p, or 6.5%, week-on-week. Thursday’s strong gains were partly reversed and contracts right along the curve finished lower on the day and more significantly lower week-on-week.  

Thursday’s strong gains on the GB power market were partially reversed

Thursday’s strong gains on the GB power market were partially reversed on Friday and futures contracts ended lower week-on-week. The only gain was on the front month which was up by £0.40/MWh on expiry on Friday. The decline in futures contracts beyond February was helped by a €1.00/tonne drop in carbon prices on the day. Day ahead baseload power for Monday gained £12.50/MWh with higher demand and lower wind forecast for early next week. A return of below normal temperatures over the weekend is expected to drive GB power demand above 40GW on Monday and lower wind availability may leave supply margins tight.  

Crude oil remained range-bound

Crude oil remained range-bound with Brent trading between $55.50 and $55.90 all week and settling at $55.88 on Friday, as it did on Monday last. While there was little change week-on-week, Brent crude was up by 9.4% over the month of January and West Texas settled at $52.20 on Friday, the U.S. benchmark gaining 7.6% month-on-month. While there is plenty of bullish appetite on the markets, the upside for oil has been limited by the ongoing economic stasis due to coronavirus lockdowns and particularly the depression of aviation demand. The latest stimulus package for the U.S. economy has yet to produce any significant increase in demand in the biggest oil consuming economy.  

 Demand on the UK gas system has risen

As temperatures fell again over the weekend, demand on the UK gas system has risen and is forecast at 347MCM today. The supply side has responded strongly and the system is currently forecast 15MCM long. Norwegian imports are running at around 120MCM and imports via the Belgian and Dutch inter-connectors are contributing a combined total of 55MCM this morning. Prompt gas contracts have yet to trade this morning but the new front month contract for March has opened sharply lower at 48.50p. Trading further out the curve has been slow but bid-offer spreads suggest some easing on near futures contracts. Brent crude remains rangebound and currently trades at $55.60.