Weekly Energy Market Update - 09/12/2019

9 Dec 2019

Home Weekly Energy Market Update - 09/12/2019

Last Week’s Pricing & Commentary



Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Jan 20





UK Gas NBP Summer 20





UK Gas NBP Winter 20





UK Power Base Jan 20





UK Power Base Summer 20





UK Power Base Winter 20





Carbon EUA Dec 19





Oil Brent Crude Feb 20





Last week saw UK power and gas pricing slump further. Front month, Summer 20 and Winter 20 gas lost 3.15 p/therm, 2.55 p/therm and 1.70 p/therm respectively. Weak prompt contracts weighed on the curve as more mild temperatures, strong wind generation and high LNG output pushed the NTS to oversupplied for much of the week. LNG flows averaged 130 mcm as terminals made room for expected deliveries over the weekend and Medium-Range Storage continued to see injections and is now sitting at 92% full compared to 86% around a week ago. The day-ahead/front month spread is now sitting at around 6 p/therm, which could further pressure near curve futures. Bearish outlooks are being fuelled by forecast temperatures to remain milder for the rest of December, unseasonably high MRS levels, strong wind output expected in the coming week and demand expected to tail off with the beginning of the holiday season. 

UK power futures followed gas down with front month, Summer 20 and Winter 20 baseload power losing £1.69/MWh, £1.26/MWh and £0.93/MWh respectively. Power futures would have been weakened not only by gas but also by weaker prompt, carbon and coal. Prompt power was pressured by strong wind, which pushed cash-out pricing negative over the weekend and is expected to remain high into week 50. Coal pricing bottomed out with the Rotterdam Cal 20 contract reaching this year’s lows during Friday’s trading, while benchmark carbon contracts suffered losses. Dec-19 EUAs lost €0.29/tonne over the course of the week as weak gas and technical selling on Monday saw the contract to post a 3.6% loss on the day. For much of the rest of the week, the contract pointed upwards, but it was not enough to recover the heavy losses. Bearish outlooks are based largely on warmer temperature forecasts and high LNG send out. However, some bulls remain looking at Dec-19 EUA supply dwindling to zero after 16th December as well as French nuclear outages.

Brent crude was resurgent this week with the Feb 20 future posting a gain of $3.66/barrel. Most of these gains were felt later in the week as both the API and EIA report showed contracting US crude stockpiles and increased distillates as refiners ramp up production for winter stockpiling. Also supporting prices was the news coming out of the OPEC+ meetings that deeper and longer supply cuts were agreed with cuts to increase by 500,000 barrels per day. This news appeared to outweigh trade talk concerns as China vowed to respond to US policy supporting Hong Kong protestors and Trump suggesting a final deal may need to wait until after the US presidential election next year.

This Morning’s View
This morning has seen UK gas soften further. Jan 20 and Summer 20 gas are currently 1.05 p/therm and 0.65 p/therm below settlement respectively. This is despite National Grid reporting the NTS as just over 40 mcm undersupplied as LNG output has dropped to around 70 mcm and Langeled sits at just under 60 mcm, which could support the prompt and see losses on futures limited somewhat. Wind production remains high, helping to keep gas demand 13 mcm below seasonal norms. This strength in wind could pressure prompt power, also dragging futures lower on the open in combination with already weak gas and carbon. Dec 19 EUAs are currently sitting €0.32/tonne below settlement, which will be also be pressuring gas and power contracts. Feb 20 Crude is down $0.38/barrel as weak Chinese export data reminds the market of the potential damage being done by the US-China trade war.

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