Weekly Energy Market Update - 13/09/2021

13 Sep 2021

Home Weekly Energy Market Update - 13/09/2021

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 21

Change on Week

UK Gas NBP Oct 21

p/therm

145.52

218.01%

11.55%

UK Gas NBP Winter 21

p/therm

148.74

189.65%

12.56%

UK Gas NBP Summer 22

p/therm

80.43

102.59%

7.24%

UK Power Base Oct 21

£/MWh

136.43

149.32%

10.05%

UK Power Base Winter 21

£/MWh

140.25

142.23%

10.83%

UK Power Base Summer 22

£/MWh

86.74

83.20%

5.95%

Carbon EUA Dec 21

€/tonne

60.92

86.19%

-0.65%

Carbon UKA Dec 21

£/tonne

53.20

17.57%

0.36%

Oil Brent Crude Nov 21

$/barrel

72.92

44.11%

0.43%

Last week saw continued volatility in both the curve as well as, and especially so, in prompt gas and power markets. Front-month NBP trekked higher still, posting fresh highs day on day last week. There was some bearish pressure at times coming mostly from Nord Stream 2 news as firstly Russia’s Foreign Minister, Sergei Lavrov, announced that he expected the pipeline to be operational in the coming days. This was then ratified a few days later by Gazprom announcing that construction was indeed completed. Whilst these headlines managed to put the brakes on the bull run briefly, traders ultimately discounted the news entirely given that the pipeline would still have to undergo certification before any gas could flow, which could take months. The other question traders are asking is does Russia have the gas to flow to ease EU supply concerns? Internal gas balances look tight after a long cold winter and Gazprom-owned storage levels are unreasonably low. However, others still see this as positioning to ensure reliance on Nord Stream 2. Winter 21 also gained on the week, pushing up a staggering 16.60p/therm on the week.

Power markets moved with gas last week as front-month, Winter 21, and Summer 22 UK baseload gained £12.46/MWh, £13.70/MWh, and £4.87/MWh. However, any volatility in the curve was vastly overshadowed by moves in the prompt. Last week saw 16 settlement periods with pricing above £1,000/MWh, 9 of these were above £3,000/MWh, and one single half-hour on Thursday priced above £4,000 to print a new all-time high. Low wind and plant outages saw fossil generators able to run charge huge premiums for their power in the balancing mechanism. As highlighted last week, this price action is concerning for the upcoming winter with so many four-digit prices seen in a low demand, calm shoulder month. Carbon markets rode on the coattails of gas for much of last week until Friday. New highs were seen first on Monday and then on Wednesday at €63.53/tonne for Dec 21 EUAs as gas, and coal pushed higher. However, Friday saw the contract drop €2.21/tonne to cement a small weekly loss. Brent markets finished the week up slightly as US supply continues to lag following damages after Hurricane Ida fighting off earlier bearish sentiment from Saudi Arabia cutting their pricing to Asia, as well as China selling out some of their strategic reserves hinting at lower and slower demand recovery than expected.

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

15.19

3.18

3.71

0.25

5.04

4.00

1.63

0.32

0.92

%

44.39

9.28

10.83

0.72

14.72

11.68

4.75

0.93

2.69

This Morning’s View

This morning has seen gas markets explode higher still with front-month gas up 6.13p/therm passing well through the first 150p/therm and now 151p/therm. The NTS is forecast 3 mcm short as power station demand pushes above 83 mcm and interconnector demand pulls 40mcm of supply away from the UK. Elsewhere Dec 21 EUAs are up €1.18/tonne being dragged higher with gas whilst Nov 21 Brent sits $0.52/barrel above settlement.

 

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