Weekly Energy Market Update - 10/05/2021

Last Week’s Pricing & Commentary

Last week generally saw markets trek higher with most contracts posting gains on the week. Gas markets continued to power higher with front month adding 2p/therm by Thursday’s settlement as high winds stopped LNG unloading into Milford Haven and traders continued to eye low gas storage levels. However, Friday’s trading brought losses that helped to trim weekly gains. All of the moves, both up and down, were magnified at the front end with seasonal contracts showing less volatility and larger gains on the week as weakness on Friday in front-month struggled to filter further down the curve. Front-month, Winter 21 and Summer 22 gained 0.99p/therm, 2.07p/therm and 1.87p/therm on the week. Power markets largely moved in line with gas, as well as taking some direction from EUAs. Front-month actually dipped £0.06/MWh on the week thanks to Friday’s sell-off, however, seasonal contracts remained well bid with Winter 21 and Summer 22 gaining £2.18/MWh and £1.89/MWh on the week. Prompt markets continued to be volatile with swings in wind output driving price action, early in the week pricing was kept in check by higher wind load factors before the end of the working week saw load factors drop significantly. System prices above £100/MWh were not at all uncommon from Wednesday through to Friday.

Carbon prices continued to push higher with just one down day last week. Dec 21 EUAs added €1.50/tonne of value through the week and closed above €50/tonne on Friday, a bullish indicator for the coming trading session. Despite meteoric gains, some are still expecting consolidation with a lack of compliance demand and the commodity gaining close to €7/tonne in the last month alone, an upward move of almost 16%. However, fund money continues to pour into the contract, helping to mop up compliance demand with fund positions reaching close to some of the larger generators in the scheme. Brent markets began the week strong, helped by US lockdown measures easing and indications of EU states opening borders for summer. However, the commodity gave back some gains over the midweek despite API and EIA showing strong stockpile drawdowns as COVID-19 cases in India continued to run rampant and aspersions, as to demand recovery, were cast, limiting Jul 21 gains to $1.58/barrel.

Last Week’s Average Generation Stack

This Morning’s View

This morning has seen the NBP race higher in early trading with front month up 2.4p/therm along with Winter 21 up 2.07p/therm. Strength in gas could be linked to the post-settlement rally seen on Friday and has been spurred on by bullish EUAs with Dec 21 up €1.64/tonne having broken through the €52/tonne level. The NTS is forecast close to 8 mcm long with demand now well below seasonal norms on warmer temperatures and relatively high wind output, which may help prompt gas pricing to ease. Brent markets are grinding higher also with Jul 21 up $0.51/barrel after a series of cyberattacks on Colonial Pipelines in the US sees several key pipelines, feeding almost half of the East Coast’s fuel supply, closed.
 

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