Weekly Energy Market Update - 03/08/2020

Last Week’s Pricing & Commentary

Last week saw Aug 20 futures roll off, causing a move higher at the front for gas and power markets while further down the curve the commodities traded closer to sideways or even drifting lower on the week. Sep 20 gas gained 0.69p/therm on the week, helped by any rolling hedges and increased open interest. Prompt markets were also firmer on Friday due to low wind output over the weekend, lower LNG flow and reduced Norwegian supply. With Aug 20 expiring at a discount to the Henry Hub, appetite for trans-Atlantic LNG flow remains subdued, which could help to support gas prices into Q4. Further down the curve, seasonal gas contracts drifted lower with Winter 20 and Summer 21 dropping 0.09 p/therm and 0.59p/therm respectively as demand remains low despite an eased lockdown and with still strong NWE storage levels and some area of Europe and the UK seeing a tightening of virus containment measures fear of oversupply remains.

UK power markets were hampered by gas trading down on the week and volatility in carbon. Sep 20 baseload gained £1.22/MWh as it became the front month contract and was supported by buying in Sep 20 NBP. Also proving some support to near-term pricing was soaring temperatures in the UK and France, which not only saw increased air con demand but also could limit French nuclear output as river waters become too hot to provide cooling. Winter 20 baseload managed to hold on to some gains, rising £0.14/MWh, whilst Summer 21 dropped £0.62/MWh. Looking at just the pricing table above could have you believe Dec 20 EUAs drifted lower on the week in a boring week of trading. However, carbon markets continue to grab attention across the sector with the Dec 20 contract trading in a near €2/tonne range on the week and daily price swings of more than €1/tonne. Monday saw the commodity drop €1.33/tone after a weak auction and fears around growing coronavirus cases bit equities. However, much of the rest of the week was spent trying to erase these gains and the contract ultimately ended the week down just €0.06/tonne from the open. Brent markets remained largely rangebound as the market digests news around poor economic data coming out of the US and Germany, growing coronavirus cases and re-emergence in some key global economies contrasting with a strong drop in US stockpiles.

Last Week’s Average Generation Stack

This Morning’s View

This morning has seen the Sep 20 NBP contract trade in a 2p/therm range, initially weak and reaching lows of 14.56p/therm and now up 0.95p/therm from settlement towards the high of the day so far. Near term pricing could see some support from an NTS forecast 10 mcm undersupplied on low Easington flow and high power station demand. Carbon markets are currently flat with Dec 20 EUAs up just €0.04/tonne and trending down from the morning’s high of €26.50/tonne. Brent is weak this morning with Oct 20 down $0.42/barrel as OPEC+ supply cuts are due to be reduced in August, which could see an injection of supply into market already struggling to recover and with still growing COVID-19 cases, this could prove too much for the market to absorb.
 

To Receive all Market Updates

Market Report Disclaimer

The information provided in this market report is intended for Brook Green Supply Limited clients and subscribers only. The content is provided and intended for general information purposes only. All pricing stated in this market report is indicative, at the time of writing, and may not be attained in trading at any time after report publication. For the avoidance of doubt, Brook Green Supply Limited does not represent or endorse the accuracy or reliability of any of the information or content, expressed or implied, nor are we acting in any capacity as a fiduciary to you. Recipients of this market report must not rely on the information and are advised to take any necessary steps to validate such information, independently assess the economic risks and merits and make your own assessment, or appoint appropriate advisors, on any legal or tax consequences before acting upon it. Under no circumstances will Brook Green Supply Limited have any liability for any loss or damage caused by dependence on any information contained within this market report. Please contact our execution and solutions desk via tradingdesk@brookgreensupply.com for further information.