Weekly Energy Market Update - 04/01/2021

Last Week’s Pricing & Commentary

Last week saw positive performance across the energy complex. The NBP lead with pronounced strength, Feb 21 NBP gained 4.63p/therm whilst the Summer 21 and Winter 21 contracts gained 2.40p/therm and 1.77p/therm. High Asian premiums have seen LNG cargoes being diverted away from Europe and into Asia, prompting NBP prices higher due to supply chain disruptions. This disruption is further emphasised with colder temperatures across Britain coupled with projections that point towards colder than seasonal norm temperatures for the week ahead. This has driven demand higher, supporting the NBP curve. Dec 21 EUAs has gained €0.22/tonne, prices surged to €33/tonne on the 24th of December on the announcement of a Brexit deal, though this strength was largely faded throughout last weeks trading as momentum faded. Price action observation does show that carbon tends to retrace lower after forming a new high, with bullish momentum following through after the initial retracement, consequently leading to a new high. This uptrend structure has remained intact, a break of this higher high and higher low structure may spell a greater correction lower, however prices remain supported as of now.

The UK Baseload curve tracked gains in the NBP curve, Feb 21 Baseload gained £3.55/MWh with the Summer 21 and Winter 21 contracts posting positive performances of £1.91/MWh each. This is due to high demand for heat generation as temperatures are expected to remain cold in the near-term, additionally weak NBP storage levels has provider wider price support. Elsewhere, Brent March 21 gained $0.48/barrel above settlement. Prices behaved slightly lacklustre across the week, despite congress agreeing on a $900bn support package. A surge in COVID-19 cases has deterred the short-term economic health of the US economy with officials pressuring the government to initiate a national lockdown. Furthermore, the recently discovered mutated COVID-19 strain that was discovered in the UK, has now been found in the US, suggesting starkly higher cases of COVID-19 in the US to come. 

Last Week’s Average Generation Stack

This Morning’s View

Feb 21 NBP is up 3.67p/therm as demand has increased to 27.3mcm above seasonal norms, whilst supply remains constraint. Dec 21 EUAs have declined €1.40/tonne as prices gain on strong performance from the surrounding energy complex, the uptrend structure remains in place and prices have created a new high which may mean a retracement may occur in later trading sessions. March 21 Brent is up $0.46/barrel on an upbeat energy complex, though the recently discovered mutated COVID-19 strain is likely to create concerns around petroleum product demand
 

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