Carbon prices continue to strengthen

Rising carbon prices led UK gas and power prices higher

Despite low demand and a strong supply surplus on the day, prompt and near futures gas prices at the NBP recorded significant gains on Monday. Concerns are rising that low storage volumes will require high injection demand over the summer maintenance period and stretch into the early winter period. Norwegian maintenance is expected to be at its most intense later this week and will continue into July. With little other price pressure, rising carbon prices led UK gas and power prices higher following some softening of prices through the second half of last week. The prompt was up by 1.40p while near futures recorded average gains of 1.85p.

GB baseload power futures moved higher

GB baseload power futures moved higher in line with gas and carbon prices with Q3 up by £0.90/MWh and Q4 by £1.65/MWh. EU ETS unit prices gained €1.50 per tonne on Monday but UKA’s gained only half that amount. Pressure on the power futures market is set to continue as gas injection rates ramp up and Norwegian gas deliveries are restricted. The day ahead price shed £2.85/MWh with the Brit-Ned interconnector returning to service and wind generation forecast slightly higher today. With temperatures forecast at or above normal for the remainder of the month, pressure on the power prompt should ease.  

 Crude oil prices eased on Monday

Crude oil prices eased on Monday as the recent rally ran out of steam on concerns that Iranian exports could double if U.S. sanctions are lifted. Brent crude and West Texas Intermediate both shed 48 cents to settle at $71.41 and $69.14 respectively. The recent bullish mood on the market has been tempered by the prospect of an agreement between the U.S. and Iran and this prospect seems to be nearing reality as the two countries continue negotiations later this week. Crude remains at near 2-year highs however as demand recovers slowly with the lifting of restrictions in countries where coronavirus vaccine roll-out has been effective.  

UK gas system is again well-supplied this morning

The UK gas system is again well-supplied this morning despite a sharp increase in storage injection demand and low wind availability. LDZ (domestic) demand is at its lowest year-to-date and overall demand is forecast at 145MCM with the system forecast 12MCM long today. The market is looking beyond the current supply-demand situation as early trading shows further strong gains in UK gas prices. Prompt contracts have yet to trade but bid-offer spreads suggest increases of up to 2.50p. The front month is up 2.85p on last nights closing level as carbon prices continue to strengthen with EUA’s up by 75 cents overnight. Brent crude has eased by 54 cents to $70.87 a barrel.