Leaked EU report suggesting even higher target prices for emissions

Prompt gas prices recorded more significant losses

Following last week’s uninterrupted daily run of gains on the UK gas market, prices eased marginally on Monday as crude oil relinquished all of last week’s gains, shedding $1.50 a barrel on the day.  This was somewhat encouraging given that carbon prices recorded further gains on the day.  The UK gas system was comfortably supplied with demand just under 150MCM despite increased storage injection demand and low wind power generation.  Prompt gas prices recorded more significant losses with the spot price down by 2.25p and day ahead by 2.30p.  The week ahead fell by 0.70p to align with the July contract.

GB baseload futures moved marginally higher

GB baseload futures moved marginally higher on Monday as carbon edged higher again and Winter 21 settled at £91.00/MWh.  The modest decline in gas prices was over-shadowed by the carbon market and a leaked EU report suggesting even higher target prices for emissions for 2030. The day ahead settled lower at £80.00/MWh, but intra-day prices hit £200/MWh on tight system margins.  Renewable generation was forecast to total just 3GW today with wind generation expected to remain weak for the rest of the week.

   Demand is increasing at a faster rate than predicted

The modest but steady gains in crude oil prices which saw Brent finish at a 30-month high of $76.18 on Friday were relinquished on Monday as the global benchmark shed $1.50 to settle at $74.68 a barrel yesterday.  Demand is increasing at a faster rate than predicted with the lifting of restrictions in more countries.  Even in Covid-ravaged India, the demand is up, and that country is pressuring OPEC to increase production in hopes of prices easing.  OPEC meet later this week to consider easing production quotas and it is now widely anticipated that output will be increased by half a million barrels by August.  The recent strengthening of the dollar has ceased, and exchange rates have stabilised.  

 Crude oil and carbon emission prices are little changed overnight

The UK gas system is well supplied this morning with a surplus of 13MCM over forecast demand of 150MCM.  Storage demand has picked up to 25MCM while power generation demand is running at 75MCM as renewable sources are contributing just 3GW this morning.  The comfortable supply situation has not prevented a reversal of yesterday’s losses on the prompt gas market as while within day gas has yet to trade, the day ahead contract has gained 2.05p and the front month is up by 1.50p in early trading.  Crude oil and carbon emission prices are little changed overnight.