Weekly Energy Market Update - 06/04/2020

6 Apr 2020

Home Weekly Energy Market Update - 06/04/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP May 20

p/therm

16.22

-44.51%

-4.59%

UK Gas NBP Winter 20

p/therm

32.71

-24.72%

2.70%

UK Gas NBP Summer 21

p/therm

29.66

-22.36%

2.27%

UK Power Base May 20

£/MWh

24.70

-35.42%

-4.67%

UK Power Base Winter 20

£/MWh

39.22

-18.68%

1.32%

UK Power Base Summer 21

£/MWh

35.22

-17.03%

1.85%

Carbon EUA Dec 20

€/tonne

17.96

-27.08%

9.85%

Oil Brent Crude Jun 20

$/barrel

33.00

-48.78%

9.09%

 

Last week saw much of the energy complex firm over the course of the week, led by gains in Brent late in the week. Near curve UK power and gas contracts were pushed lower still on the week with May 20 gas and UK baseload losing 0.78 p/therm and £1.21/MWh as demand destruction and relatively strong renewable output continued to hammer prompt markets. Further down the curve, seasonal contracts spent the first half of the week trading down however with surging oil prices on Thursday and Friday the contracts were pushed higher helping the Winter 20 and Summer 21 gas contracts to post weekly gains of 0.86 p/therm and  0.66 p/therm respectively. Curve power followed gas higher with the front two baseload seasonal contracts gaining £0.51/MWh and £0.64/MWh, also supported by strength in carbon markets

Dec 20 EUAs traded in an almost €2/tonne range on the week with the bottom of the range, €16.70/tonne, looking relatively well bid, supported by compliance buyers seeing the market at multi-year lows. Also providing support has been strength in crude as well as consolidating equity markets. The week almost saw consecutive day-on-day gains with a weak UK auction on Wednesday, barely clearing, providing the only session of daily losses helping he contract to push up to settle just below €18/tonne, €1.61/tonne above the week’s open. As already discussed, oil markets were again a point of focus in price discovery over the past week across the rest of the energy complex. Jun 20 Brent posted a gain of $2.75/barrel with most of the gains being posted late in the week. Gains were headline driven with Donald Trump announcing that he expected a resolution to Saudi-Russian oil price war soon, the Jun 20 contract responded by jumping to highs of $36/barrel in mere minutes and despite the market pulling back from these highs prices remained well above $30/barrel for the rest of the week, settling at $33/barrel. Support was found in statements from both nations that they were ready to discuss production cuts at an OPEC+ meeting scheduled for the following week. However, analysts were largely reticent to change their short-term outlook as continued demand destruction for both Crude and refined products from the continued spread of the Coronavirus could offset any drop in supply. 

This Morning’s View

This morning has seen energy markets largely push higher. May 20 gas is currently up 0.38 p/therm despite opening a little below settlement, while Winter 20 gas is up 0.39 p/therm. Whilst the curve looks to be supported by stronger carbon pricing as well as somewhat climbing Brent, prompt power and gas markets are expected to continue to be pressured by lower demand, strong renewable output and slight length in the NTS.  Dec 20 EUAs are currently up almost €1/tonne, now testing €19/tonne. Brent markets were initially weak with the Jun 20 future opening $2.08/barrel below settlement as OPEC+ pushed their meeting to discuss supply cuts scheduled for today to later in the week. However, from the open the contract has pushed c. $1/barrel higher, possibly supported by strengthening equity markets. Traders this week will expect another week of volatility and continue to watch the spread of the coronavirus, US stockpiles and news around supply cuts/dissipated OPEC+ tensions.

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