Weekly Energy Market Update - 01/09/2020

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Last Week’s Pricing & Commentary

Contracts began the week pushing higher with low wind generation, planned Norwegian maintenance and strong carbon prices helping lift prices along the curve although much of the gains occurring at the prompt and near-term contracts. Additionally, gas prices continued to take direction from Henry Hub with lower supply seen in the U.S. due to tropical storms. The first half of the week saw Sep 20 NBP moved from strength to strength as the contract neared expiry on by Thursday, posting gains of 7% and 5% on Monday and Tuesday. With wind output returning to near norm levels on Wednesday, gains were capped with the contract posting a smaller jump of just under 2%. Price increases were less significant down the curve with Winter 20 and Summer 21 moving closer to 1-2% higher into mid-week. Power prices largely tracked gas with more exaggerated gains towards the front end of the curve however power prices have now lifted above levels seen at the start of the year, pre COVID-19. Oct 20 contracts took over as the front month contract on Thursday which spurred selling off, seeing Oct 20 NBP and baseload lose 1.57p/therm and £0.83/MWh on the day, helped by expectations of greater LNG import over the month due to improved US LNG margins. Contracts along the curve followed suit again although less so. With this said, prices struggled to maintain the bearish moves with Friday seeing most contracts return to strength, more than recouping the losses seen in the day prior, helping the contracts to post marked increases for the week. Carbon returned to strength too, coming within touching distance of €30 once more.

Dec 20 EUAs lifted by €1.68/tonne on Monday, hitting 5-week highs as the contract jumped above €27/tonne. This move was linked to a bullish article in the Financial Times speculating carbon prices could go as high as €40/tonne by 2022. Tuesday saw further bullishness with the contract gaining €0.98/tonne with analysts pointing to support from gas markets as well as spec arms squeezing gains out of a month with reduced supply and low liquidity. Moves upwards calmed by the latter half of the week, with Thursday and Friday seeing slight within day losses. Oil was sideways on the week despite volatility on certain days. Early strength in the Nov 20 Brent contract was attributed to U.S. storms limiting supply due to shutdowns whilst weakness on the latter half of the week was linked to storms causing less damage than originally expected. Nov 20 Brent eventually finished the week up by $0.38/barrel.

Last Week’s Average Generation Stack

This Morning’s View

Early strength in gas this morning will likely pull power higher on the open. Oct 20 NBP is up 0.90p/therm above settlement whilst Winter 20 NBP follows closely behind, up 0.787p/therm at time of writing. Dec 20 EUAs began the day flat to settlement but have since sold off, currently sitting €0.26/tonne below settlement. Nov 20 Brent is pushing higher this morning with the contract sitting $0.44/barrel above settlement, with further storm damages impeding U.S. production. 
 

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