Last week proved to be extremely volatile in the gas and power markets with both commodities beginning the week quietly on Monday before prices rocketed on Tuesday following the news that Framatome had informed EDF of a “deviation from technical standards governing the manufacture of nuclear-reactor components”. This immediately sparked fear of the French nuclear fleet going offline this winter and had many casting their minds back to 2016 when EDF’s French nuclear fleet was previously under scrutiny for the standards of certain nuclear components which caused prices to strengthen as outages extended. The Oct-19 gas contract rose 3.3 p/therm by 9am after this news and didn’t let off at any point, eventually settling c. 6.3 p/therm higher than the morning’s open. Further news regarding production being halted at the Dutch gas field Groningen by 2022, 8 years earlier than previously planned, and Europe’s top court curtailing Gazprom’s access to Nord Stream pipeline link further supported price rises. With this said, production halting at Groningen sooner than 2030 had been widely reported and whilst the exact year wasn’t known until last week, it’s possible that this situation had largely been priced into contracts already. Gas pricing was highly volatile from Wednesday through to the end of the week with the commodity’s Oct-19 contract trading within a 4.42 p/therm range and the Winter-19 contract within a 3.5 p/therm range. Power mostly followed gas although gains on the front month contract were more muted throughout the week.
Carbon took the opportunity to follow gas and power on Tuesday with the Dec-19 contract increasing by €1.69/tonne on the day but failed to really get going for the rest of the week as it traded sideways through to Friday with a much tighter range than gas. Oil markets were largely unaffected by moves in the other commodities and began to post losses when news broke that Trump was weighing the possibility of easing sanctions on Iranian oil which caused the Nov-19 contract to lose c. $2.3/barrel in 2 hours on Wednesday. Further rhetoric over fears of the global macro-economic picture helped oil prices drift lower showing a loss of $1.38/barrel for Nov-19 for the week.
This Morning’s View
Gas began the morning strongly with the Oct-19 contract up 0.45 p/therm already with Nov and Dec also showing strength helping the Winter-19 price increase by 0.995 p/therm from settlement. The system opened finely balanced this morning with flow currently 1.7mscm long for forecast demand but continued low wind generation and warmer temperatures could apply pressure as gas burn generation has to pick up the slack. LNG imports remain high with 22mscm from South Hook and 18mscm at Isle of Grain with c. 40% LNG storage remaining so send out levels could increase if needed. Carbon is currently up €0.24/tonne although prices has softened after the highs of €27.25 at this morning’s open. Drone attacks on Saudi oil facilities are reported to have cut out 5% of global supply and prices have surged as a result. The Nov-19 contract is up $5.17/barrel at time of writing, almost a 10% increase from settlement but prices have softened from the open and are so far continuing to do so. This could be related to the U.S. having authorised the use of the country’s emergency stockpile to help ensure stable supply, as well as Saudi Aramco confirming that vessel loading has resumed in what was being described as a fundamentally oversupplied market for weeks before the drone attacks.
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