Weekly Energy Market Update - 07/10/2019

7 Oct 2019

Home Weekly Energy Market Update - 07/10/2019



Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Nov 19





UK Gas NBP Summer 20





UK Gas NBP Winter 20





UK Power Base Nov 19





UK Power Base Summer 20





UK Power Base Winter 20





Carbon EUA Dec 19





Oil Brent Crude Nov 19





Last week saw most of the energy complex soften as bearish fundamentals and technicals took hold. Front month gas lost just over 2 p/therm through the week trading down to near annual lows. There was little in the way of bullish news to provide the contract with any support and the mix of a strong supply and storage outlook, buoyed by LNG, and weaker demand, fuelled by economic fears, pulled pricing down.

UK Power pricing also dropped with the front month baseload contract posting a loss of £1.66/MWh over the week and the near-curve seasonal contracts posting larger losses closer to the £2/MWh mark. Power pricing would have felt pressure not only from bearish gas but also weak carbon. Dec-19 EUAs lost just over €2.52/tonne over the week, trading down to levels last seen 6 months ago. Carbon pricing was pressured by weak economic sentiment, weaker gas pricing and technical selling pushing the contract down through several key support levels. 

Brent Crude also traded lower over the week with the front month future losing just over $3/barrel, the commodity’s largest loss since July. The release of weak economic data across both manufacturing and services in major economies weighed heavily on crude pricing and the return of full Saudi production added further pressure.

This Morning’s View
This morning has seen a continuation of last week’s softening in the UK gas market. Front month gas opened almost 1 p/therm lower than Friday’s settlement and has since lost a further 0.62 p/therm. This has seen the contract break through multi-year contract lows painting a bearish picture, with little to offer in terms of technical support. National Grid is reporting the NTS to have opened c. 10mcm long with strong Norwegian and LNG output from South Hook currently sitting at 43.07 mcm. This length will be putting pressure on the prompt and near-curve contracts as will strong forecasted within-day wind output. 

UK power could open lower in line with weaker gas pricing across the front of the curve. Carbon pricing is so far holding up, having only traded down €0.06/tonne at the time of writing. However, with weakness in gas and power pricing and technical sellers in the market we could see EUAs slide lower over the day. Front month Brent Crude is currently trading sideways.

All in all, after a week of significant losses across the energy complex it is difficult to drum up much interest in bullish sentiment for near-curve contracts. This month, as the Winter shoulder month, will be important in setting expectations for upcoming winter pricing and volatility should be expected around any revisions to longer-term temperature forecasts, significant changes in storage levels and any shifting in the macro-economic outlook.

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