Weekly Energy Market Update - 14/12/2020

Last Week’s Pricing & Commentary

Last week saw strong bullish sentiment dominating the energy complex. Gains in the energy mix were led by the NBP curve, with Jan 21 gaining an impressive 4.85p/therm across the week. Later dated Summer 21 and Winter 21 contracts also boasted gains of 4.07p/therm and 3.18p/therm, respectively. These gains were attributed to Norwegian strike tensions which saw up to 50mcm of supply being made offline over the weekend, with threats of further action, prompting prices higher on tight supply margins coupled with heightened uncertainty. Demand during this period has also picked up, rising above seasonal norms which further supported NBP contracts along with strong Asian gas pricing luring LNG cargoes East with JKM posting strong premiums over TTF & NBP contracts. The rally lost some momentum towards the end of the week strikes abated and capacity was restored with no headline news of further strike action.

Relatively low wind generation which averaged 7.2 GW across the week, kept the curve supported against rising temperature forecasts. Temperatures are forecast to be inline with seasonal norms and eventually rise above seasonal norms from mid-December onwards, the front of the NBP curve remains therefore prone to potential downside. UK Baseload tracked gains in NBP with Jan 21 gaining £2.48/MWh whilst the Summer 21 and Winter 21 contracts gained £2.48/MWh and £2.45/MWh. Further upside was capped as markets focused on higher wind generation and temperature forecasts. Dec 20 EUAs gained €0.60/tonne across the week after breaking above €30/tonne, prices have experienced downside pressure from profit taking whilst being supported from a bullish energy complex. Failure to sustain momentum above €30/tonne could see prices fall back below, especially if the energy complex retraces gains this week. Feb 21 Brent gained $0.74/barrel, prices were pressured by rising COVID-19 cases in the U.S., with officials citing lockdown potential whilst vaccine hopes kept prices somewhat afloat. These factors may continue to see sideways actions in oil prices unless inventory data indicates greater petroleum production consumption.  

Last Week’s Average Generation Stack

This Morning’s View

Jan 21 NBP is up 1.02p/therm this morning though wind outturn has jumped to 10GW from last weeks 7GW average, with demand down to 48mcm below seasonal norms. These bearish factors may feed into prompt NBP contracts. Dec 20 EUAs have gained €0.55/tonne with prices breaking above €31/tonne, sustained momentum could see €31.5/tonne being met today. Feb 21 Brent is up $0.41/barrel ahead of the FED’s interest rate decision and policy meeting thereafter this week. 

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