Weekly Energy Market Update - 14/10/2019
14 Oct 2019

Commodity

Unit

Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Nov 19

p/therm

42.13

-30.95%

2.88%

UK Gas NBP Summer 20

p/therm

44.04

-9.19%

3.51%

UK Gas NBP Winter 20

p/therm

53.60

-6.29%

2.59%

UK Power Base Nov 19

£/MWh

48.95

-21.04%

1.62%

UK Power Base Summer 20

£/MWh

47.97

-6.89%

2.87%

UK Power Base Winter 20

£/MWh

54.96

-4.45%

2.02%

Carbon EUA Dec 19

€/tonne

24.44

-1.45%

2.39%

Oil Brent Crude Dec 19

$/barrel

60.51

9.46%

4.29%

 

Last week saw the energy complex consolidate and gain strength over the week. Front month gas posted gains of almost 1.20 p/therm over the week, with the contract posting near day-on-day gains until Friday where prices softened throughout the morning helping to cap the weekly gain. Near curve Seasonal NBP contracts also posted weekly gains with Summer-20 and Winter-20 rising by 1.49 and 1.35 p/them respectively. There have been no significant changes to fundamentals with UK and continental storage remaining comfortably high, several LNG vessels still expected to hit European and UK shores in November and persistent fears around demand.

Power pricing also strengthened over the week. The front month baseload, Summer-20 and Winter-20 contracts posted gains of £0.78/MWh, £1.34/MWh and £1.09/MWh respectively. This strength would have been linked to higher gas pricing as well as carbon contracts finding some support and rising over the week. Dec-19 EUAs opened the week strong with Monday seeing a gain of €0.54/tonne after a previous week of losses. Tuesday saw the contract erase Monday’s gains and fall further with the market discussing bearish outlooks and possible further losses. However, the rest of the week saw Dec-19 EUAs gain €2/tonne from Wednesday’s open to Friday’s settlement. Some have linked this to short covering, Phase 3 compliance buying and improving Brexit sentiment as several headlines hit that looked to reduce the risk of a no-deal Brexit.

Oil markets, again, saw benchmark contracts post weekly gains. Dec-19 Brent rose by almost $2.50/barrel from Monday’s open to Friday’s settlement amidst lots of price volatility. Monday-Wednesday saw the contract trade in a $2.3/barrel range but close on Wednesday relatively flat to Monday’s open, a testament to how much the contract moved around over the early week. However, Thursday and Friday saw the contract climb almost $2.47/barrel back above the $60/barrel mark. Volatility throughout the week could be linked to several factors from geopolitical risk in civil disruption in Ecuador, oil tanker attacks in the Middle East, EIA demand estimation reductions, US inventory increases and apparently easing US-China trade war tensions.

This Morning’s View
This morning has seen front month UK gas open 0.26 p/therm below settlement, rally up to close the gap and soften slightly, now trading just 0.04 p/therm below Friday’s settlement. Seasonal contracts are yet to trade, however Dec 19 is also trading below settlement. National Grid is reporting the NTS to have opened c. 7 mcm short despite stronger send out from Langeled and South Hook. Forecasted demand is sitting at almost 210 mcm close to seasonal norms, amidst cooler temperatures leading to increased LDZ offtake as well as increased gas-for-power demand with far weaker wind output currently at c.1 GW compared to the 12-13 GW we saw through much of the last working week. This will be providing support to the prompt and could have helped to push near-curve contracts higher from a weak open. However, it may be difficult for gas prices to post significant gains if the rest of the energy complex continues to soften with Dec-19 EUAs and Dec-19 Brent currently trading €0.47/tonne and c. $0.70/barrel below settlement respectively. This provides mixed sentiment for power pricing on the open with prompt gas and power pricing supported by low wind, high demand but futures across the energy complex look to be softening.
 

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