The sharp step up in gas futures boosted baseload futures.

A spell of persistent colder weather in Asia was given as the cause for the large step up in gas prices

 A spell of persistent colder weather in Asia was given as the cause for the large step up in gas prices on the NBP on Thursday. Increased gas demand there has lifted the Japanese Korean Marker, and this has added a premium to Asian LNG prices which could see LNG cargoes diverted away from Europe. The U.S. Henry Hub also rose sharply yesterday aided by a report from the EIA which showed a large draw on U.S. gas reserves last week. NPB futures closed over 2.50p higher at the front of the curve, while the front seasonal contracts settled just over 2.00p higher. The strong gains in gas futures lifted the prompt yesterday even though the outlook is for milder temperatures next week and the UK gas system was well balanced yesterday.  

 Carbon EUAs rose by around 4.0% yesterday

The sharp step up in gas futures combined with higher crude oil and carbon prices on Thursday to boost baseload futures. The near months averaged gains of £1.50/MWh, while gains further out were not as strong. Carbon EUAs rose by around 4.0% yesterday with the spot settling at €30.90 per tonne. An outage on the link between the UK and The Netherlands coupled with forecasts for lower wind generation saw the day ahead baseload contract reverse some of the previous session’s losses and settle at £73.16/MWh. The 1.0GW interconnector is expected to be down until the end of the year.  

The crude oil markets choose to ignore the large build in U.S. inventories last week as gasoline demand in the U.S. dropped to the lowest level since May

After several days of sideways movement where Brent bubbled below the $50 a barrel marker, the global benchmark finally broke through yesterday and closed at $50.25 a barrel. The crude oil markets choose to ignore the large build in U.S. inventories last week as gasoline demand in the U.S. dropped to the lowest level since May due to coronavirus travel restrictions being reimposed across many States. The market is hopeful the role-out of the vaccines will lead to a quick return to air-travel in Europe and America and boost flagging demand. West Texas Intermediate settled $1.26 a barrel up at $46.78 yesterday.  

 Sterling has weakened over the last few days and there could be some further volatility in the currency today

  The UK gas system is very comfortable this morning as demand has fallen to 289MCM and supplies are long by 28MCM according to the National Grid. Trading at the prompt market has yet to get going and early indications are the market will open flat. NBP futures opened a touch firmer but as of 09:30 most contracts have reversed that trend and are trading lower with the front month 0.42p down. Sterling has weakened over the last few days and there could be some further volatility in the currency today as Brexit talks resume and a ‘no-deal’ is looking more likely. Crude oil prices have eased a touch with Brent last exchanging at $50.09 a barrel.