Weekly Energy Market Update - 19/07/2021

19 Jul 2021

Home Weekly Energy Market Update - 19/07/2021

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 21

Change on Week

UK Gas NBP Aug 21

p/therm

85.48

104.55%

-5.04%

UK Gas NBP Winter 21

p/therm

91.08

77.37%

-5.53%

UK Gas NBP Summer 22

p/therm

55.32

39.35%

-4.61%

UK Power Base Aug 21

£/MWh

87.63

71.12%

-3.21%

UK Power Base Winter 21

£/MWh

93.76

61.94%

-3.92%

UK Power Base Summer 22

£/MWh

62.37

31.73%

-3.41%

Carbon EUA Dec 21

€/tonne

52.89

61.64%

-2.52%

Carbon UKA Dec 21

£/tonne

43.60

-3.65%

-3.86%

Oil Brent Crude Sep 21

$/barrel

73.59

45.26%

-2.59%

Last week saw prices dipping lower, albeit with large trading ranges and pronounced volatility. On Monday, the front 9 months of gas and power pricing were pulled lower by news that Nord Stream 2 construction would be complete by the end of August. Whilst positive news for the bears, there still is not a firm commissioning date or whether gas will even flow this year. Furthermore, bulls often bought the dip, creating further volatility within contracts and ensuring front month NBP regularly traded in a c. 5p/therm range. With prices quickly moving around and momentum often drawn from post settlement price action, the move lower over the course of the week really only tells part of the struggle across contracts. Aug 21 and Winter 21 NBP lost 4.54p/therm and 5.33p/therm across the week although rapidly changing sentiment could have easily seen the contracts finish the week up overall. With losses focussed on the front 9 months of the curve, Summer 22 NBP dropped a paltry 2.67p/therm in comparison. Moves in power were largely the same, with Aug 21 and Winter 21 baseload losing £2.91/MWh and £3.83/MWh respectively whilst Summer 22 baseload moved £2.21/MWh lower across the week.

The EU announced its ‘Fit for 55’ climate change package plans which announced sweeping plans to help EU states meet 2030 emissions targets on Wednesday. Whilst this provided some support to EUAs on the announcement day, the commodity had largely priced in political support and the Dec 21 EUA contract shifted €1.37/tonne lower by the end of the week. UKA’s, whilst typically linked to EUAs since their inception, sometimes moved independently of them last week, possibly a function of liquidity. The Dec 21 UKA contract still dipped by £1.75/tonne, narrowing the EUA/ UKA gap marginally.

Oil began the week quite stable, occasionally finding support from positive IEA data before news broke of key OPEC+ producers pushing to increase their respective supply into an already fragile market with supply finely balanced on recovering demand. Once confirmed, worries jumped to the possibility of other OPEC+ producers increasing their supply after UAE paved the way. The Sep 21 Brent contract softened by $1.96/barrel after some general moves higher over the first half of the week.

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

10.98

4.57

6.50

0.08

4.89

4.34

2.08

0.01

0.52

%

32.33

13.46

19.13

0.23

14.39

12.77

6.14

0.03

1.53

 

This Morning's View

A blockbuster start for the front 9 months of gas sees Aug 21 and Winter 21 NBP up 5.36p/therm and 4.82p/therm respectively. The gap at the open looks to almost instantly retrace the losses experienced over last week. Furthermore, low wind output and potentially dropping solar levels as slightly cooler and wetter weather arrives could put even more pressure on a system already struggling to get into the groove for injection season as winter looms. Dec 21 EUAs are dragged €0.48/tonne higher by strength in gas whilst oil dips on over-supply worries with Sep 21 Brent down $0.93/barrel.

 

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