Weekly Energy Market Update - 05/08/2019
5 Aug 2019
Gas and power contracts shifted higher over the course of last week with Thursday bringing increased levels of volatility. UK Winter-19 NBP gas contract opened the week at 50.72 p/therm as the contract spent the first half of the week moving sideways with little to talk about as volumes were low and summer holidays led to quiet trading floors.
As of Wednesday close, the UK Winter-19 gas contract had moved down by 0.42 p/therm (0.83%) from Mondays open despite the UK government pushing no-deal Brexit rhetoric which could have caused increased levels of volatility in the markets. As it happened, this talk mostly affected the pound as it reached 2-year lows against the dollar and euro with further losses expected. UK Winter-19 baseload power similarly moved sideways until Wednesday with the contract also shedding 0.11% since Monday and closing on Wednesday at £55.66/MWh. Carbon showed attempts to push higher each day from Monday to Wednesday as the commodity continues to highlight willingness to breach the psychological €30 mark. The Dec contract opened at €28.27/tonne on Monday, rising just over €1 to €29.28/tonne for the highs of the day before dropping off and closing at €28.43/tonne. Despite carbon attempting to push upwards within day, the Dec contract still decreased 0.81% from Monday to Wednesday.
Thursday proved to be the real talking point of the week as sideways or slight decreases in price movements were swapped for volatility and large price increases. The Sep gas contract rose from 30.1 p/therm at Thursdays open to 35 p/therm at the close, an increase of 16.28% for the day. This jump was felt along the curve as the UK Winter-19 NBP gas contract moved 4.24% higher, closing at 52.9 p/therm and retracing the losses seen from the previous Wednesday (24th July).
The Sep baseload power contract showed similar movements to the gas as it rose 7.53% on the day and again this was felt down the curve as UK Winter-19 baseload power increased by 3.47%, a price move from £55.66/MWh to £57.59/MWh. Reduced Norwegian flow to the UK system and strong carbon prices were partly the cause of the sharp increases seen to both gas and power on Thursday. Carbon began the day quickly with the Dec contract moving up 2.9% by 9am before closing at €29.45/tonne which brought the contract back to similar highs seen in the week previous. Despite periods of losses, carbon can be seen consistently trading upwards since the beginning of June and is showing signs the €30 mark can be breached if these trends continue. Oil almost exactly contrasted gas, power and carbon movements with Oct contract pushing slightly higher from Mondays open ($63.02/barrel) to Wednesdays close ($64.22) before sharply dropping on Thursday. Thursday saw the contract lose $4.07/barrel to the lows for the day (6.35% decrease) before steadying somewhat and closing the day at $61.05/barrel, a decrease of 4.74% for the day. This drop followed a series of tweets from the US president and his intentions to impose additional import tariffs on Chinese goods which ramped up tensions surrounding the trade war and increased nervousness in the markets. Friday brought softer gas and power prices as both commodities lost value at the end of the week although the gains experienced on Thursday couldn’t fully be retraced.
This morning, gas has continued to show weakness since Fridays losses as it looks to drop to the lower levels seen last week. UK Winter-19 NBP gas contract is trading at 50.25 p/therm at the time of writing but with little volume moving. Carbon and oil are both reporting losses this morning as carbon Dec contract is down €0.51/tonne and oil Oct contract is down $0.52/barrel currently.
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