Carbon prices tumbled for a second consecutive day

UK gas prices declined sharply for a third consecutive session

The market adjustment to the prolonged pattern of gains on the UK gas market intensified as prices declined sharply for a third consecutive session on Wednesday.  The premium built up in recent weeks had become unsustainable in light of falling demand accompanied by the slide in carbon prices and near futures contracts shed 10% in value day-on-day.  Demand on the UK gas system fell below 200MCM yesterday, less than 10MCM above the seasonal norm, despite low temperatures and weak wind availability.  Spot and day ahead gas prices fell heavily again on Wednesday but remaining prompt prices were not available at time of writing.

GB power futures recorded heavy losses

GB power futures recorded heavy losses as carbon prices tumbled for a second consecutive day on Wednesday.   The first day of trading in the UK ETS  saw heavy selling of EUA’s by UK holders as they move to take up the new UK allowances.  The front month settled at £70.00/MWh but remaining summer months all settled below that level. Day ahead baseload power fell by £9.00 with lower fuel and carbon costs and forecast higher wind generation today.  Wind is expected to contribute 6GW today, up from just 1.5GW yesterday and is forecast to be significantly higher again on Friday.

Crude oil prices fell in early trading yesterday

Crude oil prices fell in early trading yesterday and weekly inventory data from the U.S. sent mixed signals with crude stocks increasing but gasoline stocks declining.  The slow reopening of European economies did little to support crude oil prices, the global benchmark settling $2.05 lower day-on-day at $69.66 a barrel.  Optimism that the U.S. and Iran may reach a new agreement which could see easing of economic sanctions on the Islamic Republic added to the bearish mood amid concerns over increased Iranian production outweighing increasing demand. The dollar continued to weaken amid speculation around an increase in interest rates by the Federal Reserve.    

Carbon prices begin to recover some of the sharp losses of the past 2 days

The heavy losses on the UK gas market over the past 2 days have been stemmed, suggesting that the premium built in recent weeks has been largely discarded.  Prompt gas prices have recovered somewhat despite a healthy supply-demand balance on the UK gas system.  Early trading on the futures market shows near futures contracts gaining between 1.00p and 2.00p as carbon prices begin to recover some of the sharp losses of the past 2 days also.  The carbon market volatility which accompanied the first day of trading on the new UK ETS appears to have abated and EU ETS unit prices are up by over €1.50 per tonne this morning.  Crude oil prices are virtually unchanged overnight.