Weekly Energy Market Update: 08/02/2021

Last Week’s Pricing & Commentary

Last week saw carbon take the limelight as the commodity rose a whopping €5.25/tonne, to not just clear comfortably above the €30 level, but reach new highs as the contract comes ever closer to €40/tonne. The Dec 21 EUA contract struggled to hold levels above €33/tonne on Monday as two breaks were retraced however, the contract rebounded, pushing higher through key technical levels on Tuesday and Wednesday to see over 10% added to the price. The contract swayed through to the end of the week, still mostly managing settlement-to-settlement gains, and managed a new high of €38.73/tonne on Friday. Overall, the commodity comfortably dealt with the first full week of 2021 auctions.  Looking to gas and power, general bullishness amongst the complex helped lift further dated contracts, with Summer 21 and Winter 21 pulled higher by rampant carbon and optimistic oil markets. Winter 21 NBP and baseload rose 2.45p/therm and £2.25/MWh, respectively. Moves reversed towards the front end of the curve with Summer 21 NBP and baseload posting minor gains whereas Mar 21 NBP and baseload lost 2.83p/therm and £2.53/MWh.

With the end of winter in sight, warmer forecasts for the end of Feb and increased LNG expected into UK shores due to NBP premiums, the front-month contracts were driven down. However, changeable weather and forecast accuracy saw large trading ranges continue and nervousness around volatility until Feb is behind us. Despite the front-month weakness, low wind at the start of the week saw system prices reaching highs of £600/MWh and units being run at £2,500/MWh in the BM, signalling a change in wind generation and weather data could see turbulent prices filter into the whole of the front end of the curves. Oil continued in its recent upwards trajectory with Apr 21 Brent lifting $4.43/barrel on the week to settle just shy of $60/barrel, a key technical level. The contract hardly faltered all week, pushing higher as analysts forecast the commodity could reach mid-$60’s due to a tight market, rising demand and more promising economic data out of the US.   

Last Week’s Average Generation Stack

This Morning’s View

A whirlwind start to the day as Mar 21 NBP quickly rose more than 5p/therm above settlement and currently sits 5.68p/therm up on the day. Gains have begun to filter along the curve as cold weather hits Europe, with many parts of the UK experiencing snowfall. With wind expected to dwindle by Thursday, the coldest forecast day of this week, markets have rallied higher. Currently, high wind output and length in the NTS could dissipate the contracts from further running riot. Carbon and oil sentiment matches gas with Dec 21 EUAs and Apr 21 Brent rising by €0.94/tonne and $0.79/barrel respectively. This Morning’s View

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