Weekly Energy Market Update - 26/04/2021

Looking at the table above it would be easy to think it had been a bearish week for gas markets, however the opposite was true until Friday. Front month NBP gained almost 2 p/therm from Monday’s open to Thursday’s settlement as low wind, cooler than normal temperatures and supportive EUAs drove pricing higher. However, on Friday the contract gapped 1.71p/therm lower on the open before selling off further within-day to close below 51p/therm. Weakness came from an NTS forecast almost 30mcm long, as well as data suggesting a spike in Ukrainian gas flow into Western European hubs and commentators noting the contract was due some correction after six consecutive days of gains. This pressure was most pronounced at the front of the curve but also dragged Winter 21 and Summer 22 into negative territory for the week. May21, Winter 21 and Summer 22 NBP dropped 1.28p/therm, 1.47p/therm and 0.38p/therm on the week.

Power markets were slower to react to bearish gas, which saw the curve keep gains on the week also taking direction from bullish EUAs with Winter 21 baseload spending time above £71/MWh. Front month baseload gained £0.76/MWh whilst Winter 21 and Summer 22 gained £0.66/MWh and £0.98/MWh. Carbon markets were strong on the week with Dec 21 EUAs gaining €2.57/tonne. Tuesday to Thursday was spent reaching fresh highs each day with trading ranges of almost €2/tonne common before Friday saw the brakes somewhat put on the move higher, amidst extreme weakness in gas, with the contract settling flat to the open. Many will be seeing carbon as a difficult contract to sell after recent gains and the investment communities flow into the commodity, however it is important to keep an eye on fundamentals and remember that fund money could exit the market if another higher yield play becomes apparent.

Brent markets struggled last week with heavy losses during Tuesday and Wednesday’s trading as US stockpile data revealed increases and waning demand. Adding further pressure to demand expectations was rapidly climbing COVID-19 cases in India, the world’s third largest crude importer. The curve found some support late in the week from Libyan supply dropping as well as promising macro data being published out of the US and China. Jun 21 Brent dropped $0.59/barrel on the week.

Last Week’s Average Generation Stack

This Morning's View

This morning has seen gas markets push higher, especially at the front of the curve with front month up 1.17p/therm, likely correcting from heavy selling on Friday and the fact that the expected spike in Ukrainian transit to European hubs remained unconfirmed by the TSO. Prompt gas may be weaker off the back of stronger wind output and an NTS forecast 22 mcm long despite demand flat to norms. Elsewhere Dec 21 EUAs continue to march higher currently up €0.72/tonne having posted a new high of €47.71/tonne and Jun 21 Brent trades at a $0.66/barrel discount to settlement. Growing COVID-19 cases in India and increased OPEC+ supplies in May weigh on pricing.

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