WEEKLY ENERGY MARKET UPDATE - 06/02/2023

Last Week’s Pricing & Commentary  

Last week saw bullish moves in power and gas despite overall bearish fundamentals in weather and LNG supply. The key supporting factor for this move in power were the bullish moves in carbon contracts, as both UKAs and EUAs have added significant value over the course of the year so far. The key reason for this has seemed to be significant buying activity by hedge funds as they look to close short positions. Weather fundamentals for week 6 have inverted to be supporting of bullish sentiments as wind generation is forecast to average 8.8GW/day, which is 15% below seasonal, and temperatures have fallen from previous forecasts to being back in line with seasonal. These changes in weather fundamentals are expected to result in an increased British gas demand of 50mcm. Due to French strikes last week the UK assumed a net export position along the IFA interconnectors of 1.5GW, despite this activity along the other interconnectors enabled the UK to maintain an overall net import position of 0.7GW. However, with further French strikes planned during week 6 this overall net import position could be challenged, which would likely result in grid running short and potentially having to make active interventions. This is likely to further support prompt contracts which may wash out into the near curves. Europe remains well stocked with gas as storage levels still fractionally above the 70% mark. Norwegian, gas nominations to the UK are expected to increase by 6.2mcm day on day this week. UKAs and EUAs both experienced very bullish weeks up 7.57% and 4.88% respectively, this resulted in both the British power and gas curves being supported during Friday’s session. Crude front month contract experienced a bearish week last week with a gradual day on day decline. The key motivator for this wasn’t demand dynamics but rather the Fed’s most recent interest rate hike in the US. It was the expected 25bps increase and so markets maintained their previous trend as that increase had already been priced in.

Last Week’s Average Generation Stack

This Morning’s View

7 LNG vessels are expected by the 20^th of Feb which is 1 more ship that the same period last year.

Wider news

Oil prices edge higher, interest rate outlook limits gains | Reuters

Exclusive: Huge chunk of plants, animals in U.S. at risk of extinction | Reuters

Turkey earthquake: More than 1,000 killed as huge quake rocks Turkey and Syria - BBC News

Market Report Disclaimer

The information provided in this market report is intended for Brook Green Supply Limited clients and subscribers only. The content is provided and intended for general information purposes only. All pricing stated in this market report is indicative, at the time of writing, and may not be attained in trading at any time after report publication. For the avoidance of doubt, Brook Green Supply Limited does not represent or endorse the accuracy or reliability of any of the information or content, expressed or implied, nor are we acting in any capacity as a fiduciary to you. Recipients of this market report must not rely on the information and are advised to take any necessary steps to validate such information, independently assess the economic risks and merits and make your own assessment, or appoint appropriate advisors, on any legal or tax consequences before acting upon it. Under no circumstances will Brook Green Supply Limited have any liability for any loss or damage caused by dependence on any information contained within this market report. Please contact our execution and solutions desk via tradingdesk@brookgreensupply.com for further information.