Weekly Energy Market Update: 01/06/2021

Last Week’s Pricing & Commentary

Last week saw wide daily trading ranges across the space as volatility continues to be a key theme. Jul 21 NBP started the week with strong gains as Monday brought within day gains of 3p/therm and a strong open Tuesday saw the contract get close to 66.50p/therm before the rest of the week was largely spent trending downwards, touching a low of 59.82p/therm on Friday, and settling largely unchanged on the previous Friday’s settlement. Support at the start of the week was found in Gazprom not choosing to take any flow capacity through Ukraine in June’s auction, a move the CEO of the Ukrainian gas transmission system operator called “artificially restricting supplies to Europe” in their battle to push Nord Stream 2. However, warmer weather forecasts for the first few weeks of June helped to ease fears around gas demand and injection season not yet being underway, whilst several LNG vessels delivering gas to the UK in the balance of May also helped to ease price action. Further down the curve, pricing tracked the front but with lower magnitude moves, Winter 21 traded a range of 5.90p/therm and Summer 22 a range of 2p/therm compared to 6.60p/therm for front month.

Power markets largely tracked the movement of gas, with a bit of a lag due to support from carbon, as Monday to Wednesday brought the front month baseload contract to close to £77.50/MWh before Thursday and Friday brought just over £3.50/MWh of losses. Carbon markets traded close to €2/tonne up from Monday to Wednesday, touching a high of €54.70/tonne on Wednesday. Support came from bullish gas, helping to push past some poor auction results. However, tracking gas once again, the latter part of the week was spent trading downwards in a move that ultimately saw the contract unmoved compared to the prior week’s settlement. Brent markets paid little attention to the rest of the complex last week as they pushed upwards with the Aug 21 contract settling close to $70/barrel, a level that has been widely talked about as a psychological barrier. Bullishness came from US stockpile drawdowns, helping to support views of higher demand for fuels and crude across the US, and continued vaccine rollouts that are expected to more than soak up any additional Iranian supply.

Last Week’s Average Generation Stack

This Morning’s View

This morning has seen the gas market reverse last week’s weakness with Jul 21 NBP up 2.70p/therm despite little changing in the fundamentals. The NTS is forecast 15mcm long as demand sits 40mcm below seasonal norms on climbing temperatures. Dec 21 EUAs are up also €1.35/tonne, taking some direction from bullish gas markets having pushed back above €53/tonne. Aug 21 Brent is up $1.50/barrel and back well above $70/barrel, a level the contract hasn’t traded at since late 2018.

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