Oil market continued to weaken on Friday

Biggest day-on-day loss on a front month contract since 2008

As more details of the likely commencement of commercial deliveries via Nord Stream 2 emerged, Western European gas markets retraced some of Thursday’s heavy losses.  The UK gas market rebounded from Thursday’s sell-off which saw the biggest day-on-day loss on a front month contract since 2008.  September gained 5.02p but was still down by over 6.00p week-on-week and contracts for the front winter months saw similar movement on Friday.  Prompt gas prices also corrected higher, helped by a tight supply-demand balance on the day.  Day ahead gas for today was up by 3.80p while the week ahead for this week gained 3.85p to settle at 103.20p.  

 GB baseload power prices rebounded Thursday’s sell-off

GB baseload power prices rebounded Thursday’s sell-off with the front month gaining £3.85/MWh while the Winter 21 contract recovered £4.15/MWh.  Friday’s recovery broadly mirrored the rebound in gas prices on the day while carbon gains were more muted, adding more impetus to power price increases. Weekend and day ahead prices fell as wind generation was forecast to pick up by Sunday and move closer to the seasonal average next week.  The day ahead price for today shed £6.00 to settle at £107.50 but the full week ahead price for this week was up by £0.35/MWh.  

Recent slide in prices is primarily down to the resurgence of Covid-19

The oil market continued to weaken on Friday leaving the global benchmark, Brent crude, over $5.00 a barrel lower week-on-week.  The recent slide in prices, which has continued for 7 consecutive sessions, is primarily down to the resurgence of Covid-19, in particular the Delta variant, throughout the world.  No major economy, or oil consuming country, has been spared and the negative impact on oil demand recovery and buying interest has dried-up.  Brent crude fell by a further $1.27 a barrel to settle at $65.18 on Friday and West Texas was down by $1.36 to $62.14 a barrel.  EU ETS unit prices recovered marginally from Thursday’s heavy losses.  

UK gas prices continue to recover

UK gas prices continue to recover from Thursday’s big sell-off as the market weighs the likely impact of Russian deliveries via Nord Stream 2 in Q4.  The front month contract is up by 1.49p but Q4 has gained almost 3.00p in early trading this morning.  Prompt gas contracts have yet to move on the trading screens but bid-offer spreads suggest upward move-ment here also, particularly as the UK gas system is finely balanced with demand increasing over the past 2 hours.  The 7-session run of losses on the oil market looks like coming to a halt today as early trades show Brent crude up by $1.68 a barrel.  Carbon emissions prices are also strengthening this morning.