WEEKLY ENERGY MARKET UPDATE - 01/08/2022

Last Week’s Pricing & Commentary  

Last week saw volatility as the markets remained nervous amid a poor outlook for winter supply. Gazprom announced that flows via Nord Stream 1 were going to be cut further, down to 20% of it’s capacity. The ongoing arguments around the return of the famous Siemen’s turbine continued with rows over paperwork and sanctions. Many western commentators blamed the latest moves by Gazprom as retaliation to sanctions imposed by the EU and UK. Tuesday saw the market rally hard, NBP up 17% on front month and 15% for Winter-22 contracts. Wednesday then saw confirmation that gas flow nominations had dropped down to just 20% of capacity. The EU commission responded to this by finally agreeing to voluntary 15% cuts in gas demand, the first signs of demand destruction seen in preparation for this winter. The market then dropped on Thursday on little new news, front month NBP contracts shedding 14.5% of value as we move closer to delivery month. The market then edged lower on Friday as traders looked to reassess the market after a hectic week. Additional reports that the Rough gas storage facility may reopen for next summer should provide strength to summer-23 pricing as there will need to be a price premium to attract gas for the summer injection period. NBP finished the week down on the front months, losing 18.52p/therm but up 21.51p/therm and 19.99p/therm over Winter-22 and Summer-23 respectively. UBL also saw strength as low power generation in France paints a poor outlook for winter. Winter-22 UBL settled the week up £37.98/MWh and traded up to an all-time high of £528/MWh on the Tuesday. Brent saw a week of strength, front months gaining on reports of increasing demand in the US and a lack of increased supply from OPEC+. Carbon also saw gains, with reports of low upcoming auction volumes. EUAs settled the day up €2.18/tonne and UKAs up £2.08/tonne, reversing the losses of the previous week. Gas for power generation remained strong as renewable generation was week, wind averaging 5.5GW at 15:00 across the week.                            

Last Week’s Average Generation Stack

This Morning’s View

The market opens bullish, with NBP following TTF and increasing 3-4% on front month Sep-22 and Winter-22 contracts. Power to follow closely. Carbon is also up, with UKAs increasing 0.22%. EUAs are up €0.71/tonne, last trading at €79.26/tonne, pushing the 80/tonne barrier. Brent opens down, Oct-22 contracts shedding $1.66/barrel as poor productivity data from China weakens demand. The NTS is forecast 4.2mcm short with power station demand very strong as wind generation remains <1GW.

Wider news

UK generation mix moves increasingly toward renewables

Ukraine war: first grain ship leaves under Russia deal

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