Weekly Energy Market Update - 04/05/2020

4 May 2020

Home Weekly Energy Market Update - 04/05/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Jun 20

p/therm

13.28

-51.85%

-5.14%

UK Gas NBP Winter 20

p/therm

31.32

-27.92%

-2.13%

UK Gas NBP Summer 21

p/therm

28.22

-26.13%

-2.69%

UK Power Base Jun 20

£/MWh

25.24

-32.77%

-2.59%

UK Power Base Winter 20

£/MWh

40.29

-16.46%

-2.23%

UK Power Base Summer 21

£/MWh

35.52

-16.33%

-2.71%

Carbon EUA Dec 20

€/tonne

18.97

-22.98%

-9.19%

Oil Brent Crude Jul 20

$/barrel

26.44

-58.57%

5.42%

Last week saw dislocation in the energy complex, carbon pricing has recently been following price action in Brent as they share several common drivers including macro trends and industrial demand. However, last week saw oil markets rebound as news broke of crude and fuel product demands crept up, increases in US stockpiles were lower than forecast, and brimming optimism of reopening economies as worldwide coronavirus mortality rates dropped seeing the Jul 20 future posting a gain of $1.36/barrel on the week. However, Dec 20 EUAs fell almost €2/tonne from the week’s open just below the €21 mark. Many in the market attributed this drop on the week to the loss demand support from compliance buyers as the 2019 compliance period ended.

Weaker carbon paved the way for the UK baseload power curve to shed value as well with Jun 20, Winter 20 and Summer losing £0.67/MWh, £0.92/MWh, £0.99/MWh on the week. Also dragging power futures down was a weaker NBP. Last week the May 20 future expired and Jun 20 became front month, drawing relatively heavy selling dropping 0.72 p/therm on the week. This is despite firmer prompt markets, sparked by an outage at South Hook’s regas plant Monday morning and extended over the week by dwindling renewable generation, continental buying across the interconnectors and cooler temperatures. Curve gas also bucked the prompt trend and followed carbon, drifting lower on the week with Winter 20 and Summer 21 posting losses of 0.68 p/therm and 0.78 p/therm respectively.

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

9.67

4.52

4.33

0.27

5.78

3.51

2.99

0.09

0.00

%

31.05

14.50

13.89

0.85

18.56

11.27

9.60

0.28

0.00

This Morning’s View

This morning saw front month gas open strong with the first trade pushing the contract up 0.60 p/therm above settlement, however since the contract has drifted a little lower to 0.42 p/therm above settlement. The push higher was likely spurred by a stronger open from Dec 20 EUAs testing €19/tonne, despite Jul 20 Brent currently down $0.82/barrel, as well as strength in the prompt. Prompt markets may see some support from a c. 20 mcm undersupplied NTS as power station demand strengthens with only 2GW of wind output on the grid and seasonal normal temperatures. Also supporting prompt NBP contracts is almost 60 mcm of interconnector export demand. These increases in export may well help to open capacity for and help to counterbalance the influx of LNG expected by mid-month. Within day wind output is expected to pick up to closer to 7GW into the overnight periods, which may see day-ahead power contracts come under some pressure. With markets digesting the balance between still rampant coronavirus, vast amounts of liquidity worldwide being injected into major economies, production cuts, severely reduced energy demand, and mounting geopolitical tensions we expect price discovery across the complex to remain volatile and choppy with swings largely headline driven over the coming week. 

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