Weekly Energy Market Update - 14/09/2020

14 Sep 2020

Home Weekly Energy Market Update - 14/09/2020

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Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Oct 20

p/therm

27.78

-17.07%

-8.98%

UK Gas NBP Winter 20

p/therm

36.99

-14.86%

-1.48%

UK Gas NBP Summer 21

p/therm

32.71

-14.38%

0.02%

UK Power Base Oct 20

£/MWh

42.04

-5.44%

-4.17%

UK Power Base Winter 20

£/MWh

50.11

3.90%

-1.34%

UK Power Base Summer 21

£/MWh

43.17

1.70%

-1.35%

Carbon EUA Dec 20

€/tonne

28.26

14.74%

3.29%

Oil Brent Crude Nov 20

$/barrel

39.83

-35.51%

-5.62%

Last week saw gas and power futures slide, exhibiting particular weakness at the front of the curve as comfortable fundamentals saw prompt pricing largely relax. Front month NBP lost 2.74p/therm on the week and could have shown greater losses but for a slight move higher during Friday’s trading. At the prompt, strong wind output, returning Norwegian supply, and the expectation of 5 Qatari LNG-laden vessels to reach UK shores in the few weeks eased fears around a tight system and helped pricing lower on the week. Seasonal gas contracts displayed less bearish price action, with Winter 20 dropping 0.56p/therm whilst Summer 21 managed to hold last week’s open, both supported somewhat by stronger carbon in the latter half of the week. Power markets largely followed gas with front month posting the strongest loss of £1.83/MWh, whilst seasonal price action was less weak with Winter 20 and Summer 21 baseload dropping £0.68/MWh and £0.59/MWh, respectively.

Carbon began the week pointing downwards, with the Dec 20 contract dropping c. €0.60/tonne from the week’s open by Tuesday’s close. However, the rest of the week was spent focusing on the ENVI’s vote on stronger carbon targets, which ultimately saw Dec 20 EUAs climb to post a gain on the week of €0.90/tonne. The vote, which was announced as passed on Friday, saw the parliament agree to cut all EU subsidies to fossil fuels by 2025, tighten the 2030 climate target to a 60% drop in emissions relative to 1990 levels and reach carbon neutrality by 2050. These stricter ambitions are expected to put pressure on climate laggards in the EU and may affect generation capacities in several fossil fuel dependent countries. Brent markets suffered losses on the week with Nov 20 dropping $2.37/barrel, pressured by rises in US stockpiles, a lack of a global rebound in demand, growing COVID-19 case numbers in several key global economies and a struggling macro backdrop. 

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

11.76

9.24

4.77

0.30

4.44

1.62

1.46

0.07

0.00

%

34.93

27.45

14.18

0.89

13.20

4.81

4.34

0.20

0.00

This Morning’s View

This morning has seen the complex move higher with front month NBP up 0.51p/therm, Dec 20 EUAs up €0.39/tonne, and Cal 21 ARA Coal up $0.25/tonne. Prompt markets could see some support from higher temperatures causing a push higher in demand through AC units, paired with a drop off in wind output expected to touch lows of 1.5 GW later today. Despite this, the system currently looks relatively comfortable with demand forecast just below 150 mcm, some 23 mcm below seasonal norms, and power station demand just 32 mcm. Oil markets initially pushed higher this morning as another storm, Storm Sally, looks to threaten US Gulf production with rigs being evacuated. However, bearish fundamentals have since weighed on price action, keeping the Nov 20 contract flat to settlement. Looking a little further forward, OPEC+ is scheduled to meet on the 17th September to discuss compliance and address the market, although despite Saudi Arabia and Kuwait dropping their official selling prices, analysts are not predicting further supply cuts.

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