Weekly Energy Market Update - 09/09/2019

9 Sep 2019

Home Weekly Energy Market Update - 09/09/2019



Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Oct 19





UK Gas NBP Winter 19





UK Gas NBP Summer 20





UK Power Base Oct 19





UK Power Base Winter 19





UK Power Base Summer 20





Carbon EUA Dec 19





Oil Brent Crude Nov 19





Last week proved a volatile week in the commodity markets. Gas opened the week very weak with the Oct-19 contract opening 1.21 p/therm lower than Friday’s close and quickly lost a further 1.2 p/therm in the first half hour of trading. The contract attempted to recover and failed, eventually settling 1.43 p/therm lower than the open. This may have been linked to the NTS opening long and renewables taking up 40% of the generation stack during the solar peak. The rest of the week for gas was spent moving largely sideways with days of gain offset by days of losses. Afternoon rallies on Thursday and Friday saved the contract from posting greater losses. The gains seen on the Thursday and Friday prior, which at the time looked unwarranted and were largely attributed to the gas market trying to bridge the gap between Oct-19 and Nov-19 pricing, now look even more unjustified and contracts may have corrected to levels closer to value. Front month UK power showed a slight disconnect to the gas markets and posted day-on-day gains, bouncing slightly from near- two and a half year lows. The Winter-19 UBL (UK Baseload) contract followed gas markets a little more closely and drifted sideways.

The Dec-19 EUA contract lost value over the week. Monday saw the contract post heavy losses and while the rest of the week saw the contract try to hold on to value and even push close to the €26/tonne mark following news that reduced the risk of a no-deal Brexit, another day of heavy losses on Friday meant that the contract lost €1.08/tonne of value on the week. Weak economic data and auction supply jumping seemed to promote assertive EUA selling. Oil began the week trading mostly sideways until around midday (BST) on Wednesday when the Nov-19 contract gained over $2/barrel over the afternoon due to positive economic data coming out of China, the world’s largest importer of the commodity. Although at times the contract looked like it was struggling to hold on to these gains, especially on Friday morning, a strength into the close saw the contract put up gains of $3/barrel over the week.

This Morning’s View
The energy complex has opened strong this morning with front month gas posting gains of 0.79 p/therm, Dec-19 EUAs trading up €0.22/tonne and Nov-19 Brent almost $0.5/barrel higher than settlement at the time of writing. National Grid is reporting the NTS opening c. 20 mscm short and demand forecasted up at 186.2 mscm, over 70 mscm higher than seasonal norms, while the renewable outturn today is expected to be weak with wind currently contributing 3.87 GW to the stack and isn’t forecasted to increase over the day. A short NTS, weak wind and solar output, and lower temperatures will be providing support to prompt gas and power pricing.

With Dec-19 EUAs opening just below the €25/tonne mark buyers may have spotted an opportunity to buy, bouncing the contract higher this morning. Oil may have traded up on several bullish news items including confirmation that Saudi Arabia will continue to honour the OPEC production cut-agreement despite a new energy minister as well as the US confirming that it will impose sanctions on those buying Iran’s oil, which could see continuation of supply cuts from Iran. Despite these early morning bullish moves, it remains to be seen if the energy complex will hold. We would expect volatility to continue and we could see contracts fall further or post gains if bullish news continues to be published. However, little has changed fundamentally as UK and European gas storage remains close to full, several LNG vessels are expected to be delivered to the UK in September and macro-economic fears persist.

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