EU ETS unit prices hit new record highs

LNG supply is forecast to be plentiful this month

Conflicting supply and demand positions led to further increases in prompt and near futures gas prices on Wednesday.  LNG supply is forecast to be plentiful this month and, while the markets took some comfort from Gazprom’s capacity booking on the Yamal pipeline for December, quantities were small.  With storage withdrawals in Western Europe ramping up in response to cold weather, fears of supply shortages increased.  With demand below the seasonal norm due to high wind generation levels, the UK gas system was comfortably supplied.  Despite this, prompt gas prices gained strongly yesterday and prices for the remaining winter months averaged gains of over 7.00p.

 GB power futures recorded gains

GB power futures recorded gains in line with rising gas prices despite a drop in UK emission prices yesterday.  UKA’s fell below £70.00 per tonne as the UK market Cost Containment Mechanism was triggered, meaning more allowances were released to the market for December.  EU ETS unit prices hit new record highs of over €76.00 per tonne. Wind generation is forecast to fall from over 12.5GW yesterday to average around 9GW today.  The day ahead baseload price moved back up to £245/MWh as a result.  The week ahead gained marginally as low temperatures and lower wind availability are expected to lead to tight margins.

Crude oil prices rallied strongly in early trading on Wednesday

Crude oil prices rallied strongly in early trading on Wednesday with the new front month contract for February gaining over $4.00 a barrel before falling heavily later on to settle $1.70 lower day-on-day at $68.87.  As was the case on Tuesday, the gains were short lived, as reports of more nations increasing restrictions on travel added to market concerns.  The weekly U.S. inventory data sent mixed messages and West Texas Intermediate saw a similar trading pattern to Brent, settling at $65.57 a barrel.  A preliminary OPEC+ meeting yesterday failed to decide on any change in production quotas, but a decision is expected today.

Crude oil markets have one eye firmly fixed on the output from the OPEC+ meeting

The crude oil markets have one eye firmly fixed on the output from the OPEC+ meeting today where the group will decide whether to hold back on the planned increase in production from January and prices have opened higher this morning.  Brent has reversed just over half of the loss recorded on Wednesday to last trade at $69.77 a barrel. Natural gas futures on the NBP have opened softer with the front months down by around 8.50p, while contracts from the summer out have yet to trade.  Similarly, the prompt remains dormant for the moment, but contracts should open lower as the GB gas system is running with a surplus of 12MCM against a higher demand forecast for today of 326MCM.