WEEKLY ENERGY MARKET UPDATE - 03/10/2022

Last Week’s Pricing & Commentary  

Welcome to October, the beginning of winter delivery and the start of a new gas year for the entirety of Europe. The ever-changing energy markets saw another week of volatility last week, as four leaks were found on the two Nord stream pipelines (making future flows a likely impossibility) and governments rushed to protect their energy infrastructure amidst new concerns surrounding energy supply and security. Furthermore, the war in Ukraine looks poised to see escalation off the back of Putin’s annexation of four of Ukraine’s most eastern regions, which is being deemed by the international community as based on sham referendums, ultimately meaning that their annexations represent unlawful land seizures. Over the weekend the UK government’s energy support scheme came into effect, however, for businesses the exact details of the 6-month long scheme remain unclear. This is since on Saturday it was announced that the maximum discount, which had previously been understood as being £405/MWh (electricity) and £115/MWh (gas), are going to be reduced to £345/MWh and £91/MWh for electricity and gas respectively. A key aspect to reiterate is that the two supported wholesale prices (of £211/MWh for electricity and £75/MWh for gas) won’t in fact be the billable costs to the consumer as they do not include the non-commodity costs involved in the delivery of power and gas. The market, over the course of last week, displayed bipolar characteristics as it experienced sharp peaks and troughs during intraday trading. These movements were linked to any and every piece of fundamental news that emerged associated to energy, clearly showing that the market was jumpy. Gas experienced a significant rally to open the week but finished the week on a weak note with Oct 22 experiencing an overall 12% decline on the week. However, while UBL Winter 22 settled towards the end of the week, it maintained its early gains closing 23.22% up over the weeks trading. Carbon and Brent didn’t experience the same bullish pushes as NBP and UBL. EUAs fell 10.29%, UKAs reduced by 2.12% and Brent sank 3.13% to $88.49/barrel by the end of trading.

Last Week’s Average Generation Stack

This Morning’s View

There is likely going to be quite a lot of market confusion as consumers digest the impacts of the reduction to the maximum discount on their winter hedges.

Wider news

Banks, consumer stocks haul FTSE 100 lower | Reuters

Seventh day of strikes disrupts French refineries | Reuters

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