Weekly Energy Market Update - 01/06/2020

1 Jun 2020

Home Weekly Energy Market Update - 01/06/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Jul 20

p/therm

9.63

-65.97%

-10.67%

UK Gas NBP Winter 20

p/therm

30.65

-29.45%

-2.22%

UK Gas NBP Summer 21

p/therm

28.61

-25.10%

-4.15%

UK Power Base Jul 20

£/MWh

25.19

-33.27%

0.36%

UK Power Base Winter 20

£/MWh

41.94

-13.04%

1.35%

UK Power Base Summer 21

£/MWh

37.40

-11.90%

0.46%

Carbon EUA Dec 20

€/tonne

21.40

-13.11%

0.00%

Oil Brent Crude Aug 20

$/barrel

37.84

-40.20%

6.77%

Last week saw the front of the gas market continue to sell off among high renewable penetration, low demand and a strong storage fundamental picture building. Jul 20 NBP opened the week with losses catching up to sliding European gas prices over the bank holiday and continued to fall until pricing firmed on Friday. Despite this late strength, the contract shed 1.15p/therm on the week and was dragged below the 10p/therm mark by weak prompt and the June future expiring below this mark too. Seasonal contracts held up a little stronger with Winter 20 and Summer 21 losing 0.70p/therm and 1.24p/therm, however these losses now see Winter 20 gas trading just 2p/therm above Summer 21. As we move through summer and the injection season, Winter will become the centre point of traders’ attentions and could see further selling amidst a backdrop of high UK and continental Europe storage and still expected lower demand. UK Power pricing bucked the NBP trend with Jul 20, Winter 20 and Summer 21 posting small gains of £0.09/MWh, £0.56/MWh, £0.17/MWh on the week.

Whilst gas may have wanted to drag contracts lower, carbon markets were relatively resilient last week. Dec 20 EUAs settled exactly where they opened the week, trading in a €1.30/tonne range, showing signs of consolidation around the €21/tonne mark and helped higher by bullish technicals, reduced primary supply and strength in oil markets/economic sentiment. Aug 20 Brent Crude gained $2.40/barrel, helped by rolling hedges as well as optimism around supply/demand balance with record supply cuts hitting the market as well as some signs of improved demand for crude and refined products. Whilst this picture was somewhat tarnished by sharp rises in UK crude stockpiles in both API and EIA weekly reports, the market continued to push higher late in the week ahead of June’s OPEC+ meeting and expectations of the historic supply cut continuing into July.

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

7.07

4.06

8.28

0.25

4.93

2.27

2.45

0.00

0.00

%

24.12

13.85

28.24

0.86

16.82

7.76

8.35

0.00

0.00

This Morning’s View

This morning has seen UK gas continue to shed value with Jul 20 and Winter 20 NBP futures currently 1.04p/therm and 0.55p/therm down from settlement. Pricing is likely under pressure from an NTS forecast almost 15mcm long, as well as continued bearish sentiment as Gazprom opens supply to Europe via the Yamal pipeline again after a 4-day shut in, reportedly to support gas pricing. However, with wind output expected to fall further over the morning and a solar peak of c. 8GW, there may be a slight demand pick up from power stations. Dec 20 EUAs are down €0.42/tonne despite early moves upwards. Aug 20 Brent is flat to settlement as the market weighs up an expected continuation of supply cuts with an unclear demand picture. Analysts are discussing both moves higher, as more cars hit the roads in major cities and refinery runs pick up, and pullbacks, on slower downstream pricing gains.
 

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