Weekly Energy Market Update - 08/07/2019
8 Jul 2019

The UK gas and power markets began last week in much the same way as we saw the week before, with the UK Winter-19 NBP gas contract falling to 48.13 p/therm midweek, reaching recent contract lows. With front month gas already consistently seeing prices below 30 p/therm but national demand for UK gas currently above the seasonal average, we saw August NBP gas contracts try to negate some of the losses seen the week prior. UK Winter baseload power followed suit and saw contracts settle midweek at 54.16/MWh, continuing to push lower than previous weeks but not yet reaching the lows seen for the contract at the end of March-19. 

After the relatively uneventful start to last week, news struck of Norway’s Nyhamna gas processing plant’s outage looking to last longer than first expected. With the plant due back online on 6th July 2019, Operator Gassco stated on Friday afternoon that the outage at the processing plant would last until at least 26th August 2019. With almost a 2-month extension on the outage, UK gas prices rose almost immediately. UK Winter-19 NBP increased to close on Friday close to 1 p/therm higher than the open price, August NBP rose by almost 3 p/therm on the day and Day Ahead contracts saw the largest increases of over 3.5 p/therm. This increase on the front month saw prices return to levels seen mid-June, however the increase was less pronounced for the front season and further down the curve mostly erasing the losses seen at the start of the week. Power followed gas contracts with August baseload increasing almost £2/MWh but Winter baseload power showing a much less noticeable increase of £0.58/MWh, with suggestions the surges seen in UK gas and power markets from Norway’s Nyhamna were slightly exaggerated. 

Despite low levels of wind last week, the UK has extended their coal free period starting 27th July 2019 and looks to continue with high levels of CCGT generation and increased nuclear output plugging the gaps. Solar provided 22.9% of the UK’s generation at its peak last week, whilst near enough 50% of the UK’s demand was met through gas burn.

This morning UK energy markets have opened without a great deal of price action, an early attempt to rally was short lived with power and gas markets already softening. Carbon remains the biggest single mover, with the benchmark EUA contract up €0.36 on Friday’s close. In the immediate term, the market remains well supplied and it will be interesting to see if the brief support provided on the back of the Norwegian outage is short-lived.

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