Weekly Energy Market Update - 09/11/2020

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Last Week’s Pricing & Commentary

Last week ended overall bullish for the energy complex. The NBP curve was mostly upbeat, though front month Dec 20 prices slipped heavily on Friday, closing below Mondays’ open at 42.60p/therm. Prices were supported on colder than seasonal norm temperatures coupled with lower wind and renewable generation, however strong Norwegian gas flows in addition to high LNG arrivals saw prices retrace and subsequently loose gains from Monday – Thursday. British LNG arrivals are set to be dominated by cargoes from the Americas, with six cargoes from the US Gulf estimated to arrive for delivery by mid-month. Later dated contracts however remained supported throughout the week, likely due to expectations that LNG flows will slow down and forecasts pointing towards colder temperatures. Summer 21 and Winter 21 gained 1.27p/therm and 0.89p/therm, respectively.

The UK baseload curve was supported throughout the week by a bullish energy complex and gains in the NBP curve. Dec 20 gained £0.40/MWh followed by stronger gains of £1.38/MWh and £1.28/MWh, respectively. Dec 20 EUAs gained €2.03/tonne, staging an impressive comeback after falling as low as €23/tonne after failing to hold at key support levels. Despite carbon auction volumes remaining high, a positive energy complex and price action sustaining momentum above €24/tonne, saw bullish momentum leading to the €25/tonne level being met shortly after. Elsewhere Jan 21 Brent gained $2.08/barrel, prices remained volatile across the week due to U.S. elections. A drawdown in inventory data saw prices jump 1% on prospects of increased demand, prices were also upbeat on expectations of Joe Biden winning the U.S. elections, spurring a risk-on tone in the market despite Joe Biden’s view on transitioning away from oil activity. 

Last Week’s Average Generation Stack

This Morning’s View

The energy complex has started the morning mixed. Nov 20 NBP is down 0.63p/therm, demand for natural gas is significantly lower at 43.6 mcm below seasonal norms amid forecasts that point towards warmer temperatures today. Dec 20 EUAs are up €0.12/tonne, prices are currently trading at €25.54, a key decision point between €25/tonne and €26/tonne. If the energy mix remains on the supportive side, prices may gather the momentum to test €26/tonne. Colder temperature forecasts towards the end of the week could see NBP and Baseload contracts gain upside momentum, potentially encouraging a leg higher in carbon. Jan 21 Brent is up $1.03/barrel on greater market risk-appetite, following a Joe Biden win, though inventory data this week will likely determine short term price action.

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