Crude oil prices have risen by 28% over the last 4 weeks

 Prompt gas prices increased again on Friday

As cold weather persisted, UK gas demand increased to 325MCM on Friday morning and the system was forecast 15MCM short. The system remained in deficit as deliveries lagged demand throughout the day and finished 7MCM short. Following a reversal on Thursday, prompt gas prices increased again on Friday with the day ahead gaining 0.75p, up 25% week-on-week and the week ahead for this week gaining 1.25p. The December contract expired at a 4-week high of 41.68p as prices for the remaining winter months gained over 10% week-on-week  

The upward impetus on the GB power market resumed on Friday

Following the spike in price midweek, the GB baseload day ahead power contract fell by £8.00/MWh for a second consecutive day as wind generation is forecast to pick up early this week. Temperatures for Monday and Tuesday were forecast to increase, reducing power demand and likely taking coal-fired plant off the UK stack. The upward impetus on the GB power market resumed on Friday with the front month gaining £1.05/MWh. The January contract, which assumes front month status tomorrow, gained £1.10/MWh but movement beyond the winter months was more modest.  

 The recent rally on the oil market resumed on Friday

The recent rally on the oil market resumed on Friday as Brent crude settled just above $48.00 while West Texas Intermediate eased slightly to settle at $45.53 a barrel. Crude oil prices have risen by 28% over the last 4 weeks on the expectation of increased demand as countries exit lock-down with widespread immunisation. That process has yet to begin however and many major economies are still seeing worsening trends and tighter lockdowns. Assuming demand will pick up some time next year, the market balance will remain dependent on any loosening of production cuts by opec and others. The cartel meets later this week and is expected to extend production cuts, at least for Q1 21.    

Crude oil prices have softened ahead of the OPEC’s two-day meeting

UK gas demand is around 17% down on Friday’s levels at 269MCM for today as milder temperatures curb heating demand. The supply side has opened bullish with forecasts of a 43MCM surplus. The NBP prompt market has yet to agree a trade, however, the bid/ offer spreads are suggesting the market will open softer at this stage. After a run of five days of gains near curve NBP futures continue to firm this morning with January, the new front month on ICE last trading at 43.38p, up 1.14p on Fridays close. Crude oil prices have softened ahead of the OPEC’s two-day meeting and expectations are the group will extend the existing production cut agreement into 2021.