Weekly Energy Market Update - 08/06/2020

8 Jun 2020

Home Weekly Energy Market Update - 08/06/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Jul 20

p/therm

13.89

-50.92%

49.35%

UK Gas NBP Winter 20

p/therm

32.11

-26.10%

5.28%

UK Gas NBP Summer 21

p/therm

29.86

-21.85%

5.87%

UK Power Base Jul 20

£/MWh

28.12

-25.51%

11.63%

UK Power Base Winter 20

£/MWh

43.33

-10.16%

3.31%

UK Power Base Summer 21

£/MWh

38.72

-8.79%

3.53%

Carbon EUA Dec 20

€/tonne

23.24

-5.64%

8.60%

Oil Brent Crude Aug 20

$/barrel

42.30

-33.15%

12.62%

Last week saw strong gains at the front of the gas and power curves, fading somewhat for further dated contracts. Jul 20 NBP gained almost 4.60p/therm on the week as cooler temperatures, lower LNG outflow, reduced supply from Norway, strong European outflow, short covering and some days of lacklustre renewable output supported the prompt and near curve futures. Further down the curve saw more tentative gains with Winter20 pulling away from the 30p/therm mark, gaining 1.61p/therm, whilst Summer 21 pushed 1.66p/therm higher, both being dragged up by the rebounding near curve. Fundamentals for Winter, and the prompt, still look comfortable with strong storage levels and still lots of LNG on the waters with up to 10 vessels expected on UK shores by mid-month. Power followed suit rallying hard on the front with seasonal contracts showing lesser gains.

Jul 20, Winter 20 and Summer 21 baseload gained £2.93/MWh, £1.39/MWh and £1.32/MWh on the week, also supported by a weekly gain in carbon. Dec 20 EUAs gained €1.84/tonne helped by two major days of gains on Tuesday and Friday pushing the contract comfortably away from €21/tonne mark, confounding some analyst and trader expectations. Brent markets also recorded weekly gains with Aug 20 climbing $4.74/barrel on the week, supported by expectations of the OPEC+ meeting confirming deep supply cuts continuing through to July. Bearish pressure during the week was added by EIA reports showing strong gains in distillate stocks reminding traders that demand recovery may not be as V-shaped as hoped, as well as the OPEC+ meeting on Thursday being cancelled mid-week. However, news later broke that the meeting would take place on Saturday instead, reinforcing the market’s belief in producer commitments.

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

8.11

6.76

5.42

0.16

4.72

2.53

2.72

0.15

0.00

%

26.54

22.10

17.72

0.52

15.46

8.26

8.89

0.50

0.00

This Morning’s View

This morning has so far seen price action on the NBP begin relatively flat with Jul 20 and Winter 20 down 0.29p/therm and 0.11p/therm. However, most of last week saw early session bearishness later overwhelmed by buying support. The NTS is forecast long, but real time data looks balanced with a slight uptick in Norwegian flows and lower continental demand. Power station demand, however, is currently relatively strong with gas-burn generation making up almost 48% of the stack as wind output sits around 5 GW and is forecast to dwindle to c. 2 GW by the end of the day. Dec 20 EUAs are €0.44/tonne below settlement, back below the €23/tonne mark, likely also adding pressure to NBP pricing. Brent markets continue to point upwards with Aug 20 up $0.47/barrel, supported by confirmation from the OPEC+ meeting over the weekend that supply cuts will continue and those currently non-compliant countries will fall in-line. However, gains are somewhat muted, perhaps hinting at traders still very much concerned with the demand side.
 

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