Last Week’s Pricing & Commentary

Last week saw a major sell off particularly in front month contracts but also along the curve as a result of bearish weather fundamentals and plentiful supplies of LNG arriving on UK shores. Furthermore, aggregated gas storage for Europe remains above 83% full, meaning that reduced risk premiums are being priced in due to perceived security of supply. DA and other prompt contracts remain pressured in both power and gas however, the end of the week saw an uptick in front month prices (for power and gas) due to temperatures in the UK beginning to dip back in line with seasonal norms and some forecasts are suggesting they will drop below during week 3. LNG deliveries to the UK remain high, which has helped to sure up supply security, yet the high winds (which are helping with wind generation) have negatively impacted LNG deliveries at Milford Haven with some vessels having to divert which has resulted in some shortages in grid. Gas demand in the UK over the course of last week was coming off my roughly 4% day on day due to reduced gas for heating and gas for power demand, but as temperatures begin to settle back towards seasonal and potentially below the UK is likely to see a reversal of the recent demand destruction. Wind generation averaged 15.56GW a day last week which is more than 20% above seasonal norms. Front month power and gas experienced a strong trading session on Thursday, rallying 5.56% and 12.36% respectively before experiencing slight price retracement on Friday. Brent was bearish throughout the week, with a slight surge in the middle of the week. Therefore, volatility continues as traders struggle to forecast demand with geopolitics influencing a range of factors. It settled the week down below the significant level of $80/barrel and off from the massive highs of near $140/barrel seen last year.

Last Week’s Average Generation Stack

This Morning’s View

Transmission capacity along the IFA 1 interconnector is set to increase from 1GW a day to 1.5GW a day by 19^th of Jan. Also, French nuclear work forces are suggesting strikes will be imminent. Both of these factors could impact the UKs net import position with regards to power and therefore see prompt prices tick up again.

Wider news

UK ministers to hold talks with unions in bid to end strikes | Reuters

UK outlines electricity capacity market reforms, incentivising clean suppliers | Reuters Brazil protests: Storming of Congress condemned as attack on democracy - BBC News
 

Brazil protests: Storming of Congress condemned as attack on democracy - BBC News

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